Module 5 Video/ Other Flashcards
What is equilibrium?
where demand and supply intersect in the marketplace
when the producers and the consumers come together in the marketplace…
we will end up with what the teacher calls Q star,
which is the equilibrium quantity and then piece star,
which is the equilibrium price in the market.
utility is
simply your satisfaction from the consumption of a good or a service. (consumer goal) (maximize satisfaction)
A consumer’s benefit is represented by their
willingness to pay and the amount they’re willing to pay
My teacher said “market outcomes are efficient when…
the government does not intervene in the marketplace, because the prices are left to fluctuate to the equilibrium price.”
Consumer surplus does not have to equal _________ in order for the market to be efficient.
producer surplus
(Question on practice test or pre-assessment)
The only condition that needs to be met for a market to be at efficiency is that production is taking place where marginal benefit equals marginal cost.
So it is possible to maximize surplus at a point where the producers are getting more surplus and consumers as long as they’re both getting the most surplus they can as long as we’re at the market equilibrium. And we’re at a point of efficiency where marginal benefit equals marginal cost, the size of the triangles does not have to be the same.
They just have to get as much surplus as possible independently.
Price ceilings and price floors are both
barriers to reaching an efficient outcome
Dead weight loss or DWL
Consumer and producer surplus (social surplus) that they don’t receive when a price ceiling is put in the place by the government.
With a price ceiling, the quantity supplied is going to establish how much is supplied in the market. Any quantity between that and what used to be the efficient quantity that’s going to become deadweight loss.
There’s also DWL with price floors the other direction when that surplus is lost.
My teacher is calling DWL society loss
