Studied by 9 people
law of demand
inverse relationship between price and quantity
law of diminishing marginal utility
as you buy more you gain less utility from each subsequent purchase
income effect
have more money, smaller percentage of income, buy more
substitution effect
buy a cheaper produce that can be substituted for a more expensive one
demand x and y axis
x axis - quantity
y axis - price
determinants of demand (5)
consumer taste, number of buyers, consumer income, price of related goods, consumer expectations
law of supply
as price goes up, quantity supplied also goes up
changes in supply (6)
resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, number of sellers
equilibrium price
quantity demanded = quantity supplied
productive efficiency
allocating resources in least costly way
allocative efficiency
using capitol that best fits the product
price ceiling
max price
price floor
minimum price
demand side market failures
impossible to charge consumers exactly what they are willing to pay
supply side market failures
a company doesn’t have to pay the full cost of producing their product (ex. pollution)
consumer surplus
difference between consumer max price and actual price
producer surplus
producer minimum acceptable price, what they are actually charging
deadweight loss
result from over/under production (efficiency losses)
public goods
non rivalrous
nonexcludability
private goods
rivalry
excludability
club goods
non rivalrous
excludability
common goods
rivalrous
nonexcludability
externality
cost/benefit seeps into a third party
negative externality
supply side market failures
cost goes to a third party
positive externalities
demand side market failures
benefits go to everyone, not just the people who pay for them
coase theorem
private negotiation is better than government intervention for a negative externality
Note 
Flashcard (41)