TOPICS
Market
Equilibrium
Market Equilibrium and Changes in
D and S
Market Equilibrium and Allocative
Efficiency
MSB=MSC
maximum consumer plus producer
surplus
OUTCOMES
Equilibrium
what are the two
assumptions of a competitive equilibrium?
- there are many
buyers and sellers in the market
- who have no influence over
the price; i.e. they are price takers
define equilibrium; define market
equilibrium
what happens if the price is below
the equilibrium price? If it is above it?
how to find the equilibrium price
and quantity on a supply and demand schedule and
graph
define "shortage" and "surplus"
and explain using a supply and demand graph
what is the "bidding
mechanism"?
the three (or four) steps to
finding a new equilibrium when a non-price determinant
changes and how to use them
what happens to the equilibrium
price and quantity if (1) demand increases, (2) demand
decreases, (3) supply increases, and (4) supply
decreases.
what happens if both supply and
demand change
Which determinant has
changed?
Will it affect S or D of
Hybrids?
Will S or D of Hybrids increase
or decrease?
What happens ot the S and D
graph of hybrids?
Markets and
Efficiency
be able to use two models
to show why competitive market economies achieve
allocative efficiency
- MSB=MSC
- maximum consumer plus producer surplus
define marginal social benefit and
explain why it is often measured by the demand
curve
define marginal social cost and
explain why it is often measured by the supply
curve
explain why allocative
inefficiency occurs where MSB > MSC causing an
underallocation of resources (too little produced); show
on graph using the MSB=MSC model
explain why allocative
inefficiency occurs where MSB < MSC causing an
overallocation of resources (too much produced); show on
graph using the MSB=MSC model
be able to find WHAT WE GET and
WHAT WE WANT on the MSB=MSC model graph
define consumer surplus and
producer surplus and shade them in on a supply and demand
graph
define deadweight loss and be able
to locate it on a supply and demand graph if too much or
too little is produced
|
