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Midterm 1 index card topics_3

Midterm 1 index card topics_3 - MSC if the marginal benefit...

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1. Law of D – the higher the P of a good, the smaller is the Q D ; and the lower the P of a good, the greater is the Q Q D ↓ ; P Q D 2. Movement along D curve = ∆ Q D 3. Shift in D Curve = ∆ D 4. Competitive market – many buyers and many sellers; no one participant will alter price 5. Law of S the higher the P of a good, the greater is the Q S ; and the lower the P of a good, the smaller is the Q S Q S ↑ ; P Q S 6. Movement along the S curve = ∆ Q S 7. Shift in the S curve = ∆ S Q D MSB↓ Q D MSB↑ Marginal Analysis ( D ): if the marginal benefit of an action the marginal cost of the action ˃ do it = MSB
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Unformatted text preview: MSC; if the marginal benefit of an action the marginal cost of the action ˃ ˂ do not do it = MSB MSC ˂ Allocative Efficiency : all MSB MSC; none MSB MSC; MSB = MSC ˃ ˂ Adam Smith (1776) “People looking out for only their self interests are nonetheless lead, as if by an invisible hand, to advance society’s interest. Consumer Surplus = difference b/w max P consumer is willing to pay (value=MSB) & P over Q ; (MSB – P ) ÷ Q Producer Surplus = difference b/w P & minimum P willing to produce (value=MSC) over Q ; ( P – MSC) ÷ Q...
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