Microeconomics

What is scarcity?

The problem of the gap between limited resources and unlimited wants

What is surplus?

The net benefit that consumers and producers receive when they buy and sell items in a market

What is Deadweight loss?

The net benefit that is missed out on

What is efficient allocation?

Given scarcity, resources are allocated where they create the most value

What are competitive markets?

Markets where many buyers and sellers interact freely, and the price emerges spontaneously based on their willingness to pay and willingness to sell.

What are price-takers and what do they do?

Agents that are too small to influence the price, so they take the price and decide how much to buy (demand) or sell (supply)

What does being rationed mean?

Being left out if theres excess supply or demand (even though they are willing to sell or buy)

What is the difference between excess supply and excess demand?

Excess demand: the price is too high, many sellers are willing to sell, but few buyers want to purchase.

Excess demand: If the price is too low, few sellers are willing to sell, while many buyers would like to buy.

What happens when some mutually beneficial trades do not occur?

A deadweight loss

When is the market at equilibrium?

When the quantity demanded equals the quantity supplied, there’s no rationing and the prices are stable.

What is socially efficient in Microeconomics?

Similar to efficient allocation, it is the optimal distribution of resources that maximizes total economic well-being for society.

What is the difference between quantity demanded and quantity supplied?

Quantity demanded is how much consumers wish to buy at that price, and the quantity supplied is how much sellers are willing to sell. The market price forms at the point where these two quantities coincide which is the market equilibrium.

What happens to the demand curve if the price of the good changes?

You move across the fixed line.

What happens to the demand curve if the substitution price or income increases?

the line will shift to the right

What happens to the demand curve if number of consumers increases?

The market demand part of the curve will shift to the right

What is individual supply?

The quantity supplied by each firm

What happens to the demand curve if the price changes?

You move across the fixed line.

What happens to the demand curve if the number of firms increases and if the input price increases?

If the number of firms increases the market supply part of the graph will shift to the right, ff the input price increases the market supply part of the graph will shift to the left.

What usually happens when something leaves equilibirum?

other factors tend to bring it back to the same equilibrium point

What causes disequilibrium and what happens when it occurs?

Disequilibrium can happen when other usually constant factors change, such as income and it causes a new equilibrium.