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Chapter 12 Choices made by households and firms

Chapter 12 Choices made by households and firms - or lost...

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Partial equilibrium analysis: the process of examining the equilibrium conditions in individual markets and for households and firms separately General equilibrium: the condition that exists when all markets in an economy are in simultaneous equilibrium Efficiency: the condition in which the economy is producing what people want at least possible cost Pareto efficiency or Pareto optimality: a condition in which no change is possible that will make some members of society better off without making some other members of society worse off Market failure: occurs when resources are misallocated or allocated inefficiently. The result is waste
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Unformatted text preview: or lost value Public goods or social goods: goods and services that bestow collective benefits on members of society. Generally no one can be excluded from enjoying their benefits. The classic example is national defense Externality: a cost or benefit imposed or bestowed on an individual or a group that is outside, or external to, the transaction Imperfect information: the absence of full knowledge concerning product characteristics, available prices, and so on Chapter 12: Choices made by households and firms Wednesday, October 05, 2011 12:07 PM Econ 2106 Page 1...
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