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