Flashcards
5 ~ Market Price
Cards in this deck (28)
- 1What is microeconomic equilibrium?when S when meets D
- 2What is another name for microeconomic equilibrium?the market clearing price
- 3What is excess D?when S
- 4What is excess S?when S>D there is a market surplus = downward pressure on P
- 5What happens when you ↑S?↓equilibrium P, ↑D
- 6What happens when ↓D?↓equilibrium P, ↓S
- 7What happens when ↓S?↑equilibrium P, ↑D
- 8What happens when ↑D?↑equilibrium P, ↑S
- 9What is a key point about moving market equilibriums?they do not happen instantaneously
- 10What is consumer surplus?a measure of the welfare that people gain from consuming goods and services
- 11What is consumer surplus shown by?the area underneath the D curve
- 12What happens to consumer surplus when PED = 0?consumer surplus = 0 because the price that people pay matches what they're able to pay
- 13What happens to consumer surplus when PED = ∞?consumer surplus = ∞ because D doesn't respond to a price change
- 14What happens to consumer surplus when PED is inelastic?there is a relatively high level of consumer surplus because some consumers are willing to pay more
- 15What happens to consumer surplus when PED is elastic?there is a relatively low level of consumer surplus
- 16What is producer surplus?the difference between 2 price levels, the price producers are willing and able to supply a good/service for and the price they actually receive
- 17How is producer surplus shown?
- 18What are maximum prices?prices set by the gov or an industry regulator to prevent market P rising about a certain level
- 19Why would a max price be set?to prevent monopolistic exploitation of consumers
- 20What level must a max price be set to to be effective?a max price must be set lower than the market price to be effective
- 21How is a max price shown on a graph?
- 22What are black markets?illegal markets in which the market P is higher than the legally imposed max P
- 23When do black markets develop?when there is excess D
- 24What are the benefits of max Ps? (3)useful replacement for competition
holds P down (consumer welfare gains)
incentives for businesses to cut costs (to maintain profits) - 25What are the downsides to max Ps?reduces profits (less money for I)
may deter new entrants into market
firms might ↑P in other ways - 26What are alternatives to max Ps?measure to reduce barrier to enter an industry
higher T on monopoly profits - 27What is a minimum price?a form of gov intervention
- 28What must a min P be in order to be effective?min P must be higher than the market P to be effective
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- AS - Level Economics (Microeconomics) Flashcards on 5 ~ Market Price, created by Tara Pugal on 24/04/2016.
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- Tara Pugal
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