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Equilibrium
________ is when supply satisfies demand and is equal to it.
factors of production produce
Concept: ________ desired goods and services.
Consumer surplus
________: extra satisfaction gained by consumers from paying a price lower than they prepared to pay.
Price mechanism
forces of supply and demand
Resources
allocated/re-allocated in response to changes in price
Concept
factors of production produce desired goods and services
Consumer surplus
extra satisfaction gained by consumers from paying a price lower than they prepared to pay
Market
consists of buyers and sellers who come together to exchange goods
Excess supply
more is being supplied than demanded at P1, in order to eliminate the surplus, producer must lower the price
Excess demand
more is being demanded than supplied at P2, in order to eliminate the surplus, producer must raise the price
Price mechanism
moves the market into equilibrium, so that the scarce resources are reallocated.
Opportunity cost
is the next best alternative forgone. When a choice is made, there is an opportunity cost.
Producer surplus
the excess of actual earnings that a producer makes from a given quantity of output, over and above the amount the producer would be prepared to accept for that output
Allocative efficiency
happens when competitive market is in equilibrium, where resources are allocated in the most efficient way from society’s point of view.
Market efficiency
refers to the degree to which market prices reflect all available, relevant information.
shortage
a state or situation in which something needed cannot be obtained in sufficient amounts.
Note 
Flashcard (20)