ECON200 test 2 Review

ECON200 test 2 Review - ECON200 Review: Chapter 7...

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ECON200 Review: Chapter 7 Allocation of resources tells how much of a good is produced, which producers, and which consumers Welfare economics: the study of how the allocation of resources affects economic well-being Willingness to pay: the maximum amount that a buyer will pay for a good Marginal buyer: the buyer who would leave the market if the P were any higher Consumer surplus: a buyer’s willingness to pay minus the amount the buyer actually pays, measures the benefit buyers recieve o Total CS equals the area under the demand curve above the prince, from 0 to Q o Falls because buyers leave the market and remaining buyers pay a higher price Cost: the value of everything a seller must give up to produce a good Marginal seller: the seller who would leave the market if the price were any lower Producer surplus: the amount a seller is paid for a good minus the seller’s cost, measures the benefit sellers recieve o Total PS equals the area above the supply curve under the P, from 0 to Q o Falls because sellers leave the market and remaining sellers get a lower P Efficiency: the property of a resource allocation of maximizing the total surplus received by all members of society o Raising or lowing quantity would not increase total surplus o Produced by producer with lowest cost o Consumed by buyers with highest value Equity: the fairness of the distribution of well-being among the members of society Chapter 8 Deadweight loss: the fall in total surplus that results from a market distribution, such as a tax o A tax has a DWL because consumers buy less and producers sell less shrinking the market below maximized total surplus o When a tax increases, DWL rises even more o When the tax is small, increasing it causes tax revenue to rise and vice versa when it is a large tax o Price elasticities measure how much people respond to changes so higher
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This note was uploaded on 01/24/2011 for the course ECON 200 taught by Professor Vincent during the Fall '08 term at Maryland.

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ECON200 test 2 Review - ECON200 Review: Chapter 7...

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