Economics Key Terms (Micro - Pg 2)

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Cross Elasticity Of Demand (XED)
Measures the responsiveness of QD for one product to a change in P of another product. XED = % Change in QD of product A / % Change in P of product B
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Supply
The amount of a commodity that producers are willing and able to supply over a given range of prices over a given period of time.
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Producer Surplus
The difference between the price that producers are willing able to sell at and the price actually received in the market
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Price Elasticity Of Supply (PES)
Measures the responsiveness of QS t oa change in P of the product. PES = % Change in QS / % Change in P
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Equilibrium (Market Equilibrium)
The point at which demand matches supply - there is one, and only one, price and quantity at this point.
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Allocative Efficiency
The market is in equilibrium, supply matches demand at the equilibrium price. This means there is no shortage or excess supply of goods.
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Competition
Competitive markets exists when many firms are competing for customers and are forced to be more efficient (both productively and allocatively) in order to survive and achieve profitability.
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Market Failure
Market failure exists when markets fail to deliver economic efficiency. This means that the free market, without government intervention, fails to lead the optimum use of scarce resources. Therefore, there is a misallocation of resources.
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Free Market Mechanism
The system by which the market forces of demand and supply determine prices and the decisions made by consumers and firms.
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Other cards in this set

Card 2

Front

The amount of a commodity that producers are willing and able to supply over a given range of prices over a given period of time.

Back

Supply

Card 3

Front

The difference between the price that producers are willing able to sell at and the price actually received in the market

Back

Preview of the back of card 3

Card 4

Front

Measures the responsiveness of QS t oa change in P of the product. PES = % Change in QS / % Change in P

Back

Preview of the back of card 4

Card 5

Front

The point at which demand matches supply - there is one, and only one, price and quantity at this point.

Back

Preview of the back of card 5
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