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Econ Test 1 (Part 2)
Terms in this set (21)
When supply increases, it's curve
shifts to the right.
If suppliers expect prices to rise in the future,
they will reduce their quantity supplied today and store current inventory for later.
When sellers enter market,
quantity supplied will increase.
a point at which all the forces at work in a system balance each other out resulting in stability.
The supply curve is
The demand curve is
Excess supply is
when the price is above equilibrium.
Excess demand is
when the price is below equilibrium.
The height of the market demand curve at each point reveals
the willingness to pay of the marginal buyer.
The competitive market equilibrium ensures
that resources are given to consumers who value them most highly and are given by suppliers who can supply them at the lowest costs of supplying the good.
A downward sloping curve indicates that
as the price falls, people will be willing to buy more.
The difference between the height of the demand curve and a horizontal line drawn at the market price measures
the consumer surplus for the marginal buyer at each quantity demanded.
The area above the market price and below the demand curve measures
total consumer surplus.
The area below the market price and above the supply curve measures
total producer surplus.
Producer surplus is
when the market price exceeds the opportunity cost of the producers.
Total surplus is
consumer and producer surplus.
The height of the supply curve measures
the opportunity cost and the willingness to supply of the marginal seller.
When the value of a good to buyers exceeds the cost to sellers of supplying the good, the quantity is
less than equilibrium.
When the value of a good to buyers exceeds the cost to sellers of supplying the good, the quantity should shift
to the right (increase).
When the cost to producers exceeds the value to consumers, the quantity is
greater than equilibrium.
When the cost to producers exceeds the value to consumers, the quantity should shift
to the left (decrease).
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