Unit 2.3 - Competitive Market Equilibrium
What you need to know and understand:
Key concepts:
Concepts to understand:
- Demand and supply curves forming a market equilibrium
- Shifting the demand and supply curves to produce a new market equilibrium, with reference to excess demand (shortage) and excess supply (surplus)
- Functions of the price mechanism
- Resource allocation
- Signalling
- Incentive
- Rationing
- Resource allocation
- Consumer and producer surplus
- Social/community surplus
- Allocative efficiency at the competitive market equilibrium:
- social/community surplus maximized at equilibrium
- marginal benefit (MB) equals marginal cost (MC)
Key concepts:
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Concepts to understand:
- Interaction between consumers and producers in a market is the main mechanism through which resources are directed to meet the needs and wants in an economy..
- Consumer and producer choices are the outcome of complex decision-making.
- Welfare is maximized if allocative efficiency is achieved.
- Constant change produces dynamic markets.
TEXTBOOK unit 2.2
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