chapters 4-6 notes

chapters 4-6 notes - ECON 112 GE: Principles of...

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ECON 112 GE: Principles of Microeconomics Price ceiling - a legally determined maximum price that sellers may charge. (ex: rent control) Price floor - a legally determined minimum price that sellers may receive. (ex: farm products) o Price ceilings and price floors reduce the total benefit to consumers & firms from buying and selling in a market. Marginal benefit- the additional benefit to a consumer from consuming one more unit of a good or service. (Demand Curve) Consumer surplus- the difference between the highest price a consumer is willing to o The total amount of consumer surplus in a market is equal to the area below the Marginal cost- the additional cost to a firm of producing one more unit of a good or service (Supply Curve) Producer surplus- the difference between the lowest price a firm would have been o The total amount of producer surplus in a market is equal to the area above the Economic surplus- Deadweight loss- the reduction in economic surplus resulting from a market not being in competitive equilibrium.
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o Equilibrium in a competitive market results in the greatest amount of economic surplus, or total net benefit to society, from the production of a good or service. Economic efficiency - a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production, & in which the Black market
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chapters 4-6 notes - ECON 112 GE: Principles of...

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