week 4 Flashcards
what is aggregate demand/ supply?
represents the horizontal sum of the individual demand / supply curve (so u add up what everyone demands at a particular cost)
how to find the equilibrium price on the curve?
where the 2 points intersect.
when does excess supply happen?
is when the quantity supplied is greater than the quantity demanded (above equilibrium)
what is equilibrium price?
whee the quantity supplied = quantity demanded
when does excess demand happen?
is when the quantity supplied is less than the quantity demanded (bellow equilibrium)
what is the reservation price of the buyer?
highest price the buyer is willing to spend to purchase
what is the reservation price of the seller?
lowest price willing to accept
what is consumer surplus?
represents the difference between what the consumer pays and what she is willing to pay (reservation price)
what is producer surplus?
represents the difference between price the seller receives and what he is willing to receive
what is the total consumer surplus?
sum of economic surplus of all customers.
what is the total producer surplus?
sum of economic surplus of all producers.
what is the total surplus?
sum of total economic surplus and total producer surplus
(total economic surplus + total economic surplus)
what is the pareto efficacy?
situation where it is impossible to make an individual better off without making at least another person worse off
what is price celling ?
represents the maximum price imposed by the government.
when does the price celling have an effect?
when it is below the equilibrium
what is deadweight loss?
loss in economic surplus due to market not reaching equilibrium price
where is usually the consumer surplus?
at the top
where is usually the producer surplus?
at the bottom
what is price floor?
what are subsidy?
opposite of tax, government cost o assits certain groups of people
who r the winners of the subsidy?
consumers and the producers
what do government interventions do to the market rying to reach equilibrium price?
it prevents the market to reach the equilibrium price, so avoid gov interventions at all cost.
