Chapter 5 ECON 2000.docx

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23 Apr 2012
Department
Course
Chapter 5 lecture 8
The relationship between the price of a good and the quantity demanded:
- By one person is the individual demand
- By all buyers is the market demand
Efficiency
- Goal that economists pay attention too
- Producing with minimum waste
- Results when markets work well
- Resources are allocated efficiently when they are used in ways that people value most
highly
Equity fairness
Value what consumers willing to pay; what we get
Price what consumers pay
Demand Curve is a marginal benefits curve
Consumer surplus = value of a good price
-triangular area under the demand curve but above the market price
Resources may be allocated by:
- Market price
- Command
- Majority rule
- Contest
- First come, first serve: people who have the greatest foresight and get their names on a list
first
- Lottery: lucky people
- Personal characteristics or discrimination allocates based on the views and self interest of
the landlord
- Force
Opportunity cost what producers pay or give up
Price what producers receive
Supply curve is a marginal cost curve
Producer surplus = price + opportunity cost
Triangular area above the supply curve and under the market price
Consumers expenditures = producers revenue in an efficient market
Efficient allocation of resources
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