Economics Study Guide For Test 2

Economics Study Guide For Test 2 - Economics Study Guide...

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Economics Study Guide For Test 2 -Elastic demand, sellers pay more of tax -Inelastic demand, buyers pay more of tax -Demand : highest price you are willing and able to pay for a quantity of goods -Supply : the minimum price that a firm is willing to accept to produce a good -Welfare Economics : how the allocation of resources affects economic wellbeing -CS : amount buyer is willing to pay minus amount buyer actually pays -PS : amount seller is paid minus seller’s cost of providing good -Total Surplus : value to buyers minus cost to sellers -The value of CS for the marginal buyer is 0; leave market if the price were any higher -Cost to seller includes the opportunity cost of the seller’s time -The height of the supply curve is the marginal seller’s cost -Free markets allocate output to buyers who have a willingness to pay above the price -If a social planner chooses to produce less than the equilibrium quantity of a good, then the vale placed on the last unit of production by buyers exceeds the cost of production
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