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Description
Flashcards by Natalia Djohari, updated more than 1 year ago
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Created by Natalia Djohari
over 10 years ago
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| Question | Answer |
| Excess Supply | the quantity supplied > quantity demanded |
| Excess Demand | quantity demanded > quantity supplied |
| Equilibrium Price and Quantity | the price (quantity) such that the quantity supplied equals the quantity demanded |
| Reservation Price (Buyer) | the highest price a buyer is willing to pay for a given good |
| Reservation Price (Seller) | the lowest price a seller is willing to accept for a given good |
| Rationing Rule | buyers who value the good more will be the first to buy it |
| Consumer Surplus | difference between what a consumer pays and what she was willing to pay |
| Producer Surplus | difference between the price a seller receives and what he was willing to receive |
| Total Consumer Surplus | sum of the economic surplus of all consumers |
| Total Producer Surplus | sum of the economic surplus of all producers |
| Total Surplus | sum of the total consumer surplus and the total producer surplus |
| Pareto Efficiency | an outcome situation in which it is impossible to make any individual better off without making at least one other individual worse off |
| Pareto Improving Transaction | a transaction where all parties involved are better off |
| The Invisible Hand Principle | individuals’ independent efforts to maximize their gains will generally be beneficial for society and result in the socially optimal allocation of resources. |
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