Price Mechanism, Consumer and Producer Surplus and Consumer Behaviour Flashcards
1
Q
What are the 3 functions of prices
A
-rationing
-signalling
-incentive
2
Q
What is the price mechanism
A
The use of prices to manipulate supply and demand and to move markets into equilibrium
3
Q
What is consumer surplus
A
The difference between the price a consumer is willing to pay and the actual market price they paid for it
4
Q
What is producer surplus
A
The difference between the price a supplier would be willing to accept and the market price they actually received
5
Q
Why may consumers act irrationally
A
-habitual behaviour
-consumer weakness at computation
-herding behaviour
