Refers to a mixture of market activity and government activity
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How do you calculate Market Economic Welfare?
Consumer surplus (difference between max consumer is willing to pay and actual price paid) + Producer Surplus (difference between actual price paid and min that would be acceptable to producer) + Net Externalities (positive and negative externalities
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What is Economic Welfare?
Measured in money by what people would be honestly willing to pay for the enjoyment of such welfare.
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How is demand measured?
Demand is measured by a want and backed up by an ability and a willingness to pay.
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What happens to the supply or demand line due to a change in price of a product?
There is movement along the line.
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What happens to the supply or demand line due to a change in condition?
The line will shift.
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What does ceteris paribus mean?
Other things equal
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What does PED stand for
Price elasticity of demand
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If the PED is Elastic and the Price rises - what happens to the revenue
The total revenue falls
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If the PED is Inelastic and the Price rises - what happens to the revenue
The total revenue rises
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What is market equilibrium?
When quantity demand = quantity supplied
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What are the 3 characteristcs required to ensure perfectly competitive firms?
Price-takers, Individualism, Long-run normal profit
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What is a Monopoly?
One firm that is the supplier of a product in the market
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What is a negative response to Monopoly Market?
Price discrimination
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In an Oliogopoly what causes an elastic response?
When other firms do not respond to a rivals increase in price
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In an Oliogopoly what causes an inelastic response?
When other firms respond to a rivals decrease
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What positive could be taken from an oliogopoly market?
Price stability
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What is market failure?
Market failure is when a market does not contribute to the maximum level of economic welfare to society
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Other cards in this set
Card 2
Front
What is a mixed economy?
Back
Refers to a mixture of market activity and government activity
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