OUTLINE -- CHAPTER 3 Show
I. Introduction: Prices and the 5Es
II. Demand A. Definition1. a schedule III. Supply A. Definition1. a schedule IV. Market Equilibrium -- Equilibrium Price and Quantity A. Market Equilibrium1. define equilibrium What causes prices to change?V. Two Kinds of Changes Involving Demand A. Change in Quantity Demanded1. caused ONLY by a change in the PRICE of the product VI. Two Kinds of Changes Involving Supply A. Change in Quantity Supplied schgqs.gif1. caused ONLY by a change in the PRICE of the product VII. Changes in Demand AND Supply A. Case 1: D changes and supply stays the same dinc.gif; ddec.gif VIII. Examples:
IX. The Market System and Efficiency A. Introduction: The Market System and EfficiencyA. Equilibrium price and allocative efficiency What happens to consumer surplus if the price of a good increases quizlet?As the price of a good rises, consumer surplus decreases, and as the price of a good falls, consumer surplus increases. The difference between the lowest price a firm would be willing to accept and the price it actually receives.
What happens when the price of a good increases holding all else constant?A change in the price of a good or service, holding all else constant, will result in a movement along the supply curve. A change in the cost of an input will impact the cost of producing a good and will result in a shift in supply; supply will shift outward if costs decrease and will shift inward if they increase.
What happens to consumer surplus if there is a decreases in the price of the good holding everything else equal?Here, it is given that there is a reduction in the market price of the product that tends to raise the gap between the maximum willingness to pay and product price. As a result, the consumer surplus will rise.
What happens to producer surplus when price of a good rises?The size of the producer surplus and its triangular depiction on the graph increases as the market price for the good increases, and decreases as the market price for the good decreases.
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