Flashcards
Demand and Supply: An Equilibrium Analysis
Cards in this deck (14)
- 1Excess Supplythe quantity supplied > quantity demanded
- 2Excess Demandquantity demanded > quantity supplied
- 3Equilibrium Price and Quantitythe price (quantity) such that the quantity supplied equals the quantity demanded
- 4Reservation Price (Buyer)the highest price a buyer is willing to pay for a given good
- 5Reservation Price (Seller)the lowest price a seller is willing to accept for a given good
- 6Rationing Rulebuyers who value the good more will be the first to buy it
- 7Consumer Surplusdifference between what a consumer pays and what she was willing to pay
- 8Producer Surplusdifference between the price a seller receives and what he was willing to receive
- 9Total Consumer Surplussum of the economic surplus of all consumers
- 10Total Producer Surplussum of the economic surplus of all producers
- 11Total Surplussum of the total consumer surplus and the total producer surplus
- 12Pareto Efficiencyan outcome situation in which it is impossible to make any individual better off without making at least one other individual worse off
- 13Pareto Improving Transactiona transaction where all parties involved are better off
- 14The Invisible Hand Principleindividuals’ independent efforts to maximize their gains will generally be beneficial for society and result in the socially optimal allocation of resources.