Consumers, Producers, Market (Chapter 4)

an individual or entity that purchase and consumes goods to satisfy their needs and want

studies how much the allocation of resources affects the economics well-being

allocation of resources refers to

a buyer's willingness to pay for a good and measures how much the buyer values the good

represents the difference between the consumers willing to pay for a good and what they actually have to pay in the market

the benefit or surplus that consumers receive when they are able to purchase a good at a lower price than the maximum price

formula of consumer surplus

individuals or entities that creates goods or service to meet consumer's demand

they are the vital part of supply

the value that everything a seller must give up to produce a product

the amount seller paid for a good - the seller's cost

a concept that describe how well financial markets incorporate and reflect all available information in the prices of financial assets

when we can say that allocation of resources is efficient?

what is the two conditions to achieve an efficient allocation in a marketplace

a competitive market has many buyers and sellers, with entry and exit being relatively easy, and prices are determined by forces of supply and demand

it must be well-defined for a marketplace to function properly

ensures that individuals can weigh their own benefits and costs, leading to a maximation of net benefits for all participants

property rights must be exclusive because

property rights must be transferable because

the absence of transferability, then?

what satisfy the efficiency condition?

addresses how well the economy's resources are used and allocated

deals with how society's goods and rewards are, should be, distributed among its different members, and how the associated costs should be apportioned

refers to a situation in which allocation of goods and services in a free market is inefficient from a societal perspectives

occurs when the market does not produce the most desirable or optimal outcome, leading to misallocation of resources

give the 8 conditions / factors can lead to market failure

there are limited choices for buyers and a single or small group of companies have a lot of control over prices and products

goods or services that are nom-excludable and non-rivalrous

people who benefit from a good or service without contributing or paying them

government often provides public goods because private sectors underproduce due to free riders problems

the positive or negative impact that an economic activity has on third parties who are not directly involved in the transaction

leads to market inefficiency because the true cost to society is higher than what consumers and producers consider

intervention of government to correct external costs through regulations or taxes, aligning private incentives with social welfare

resources like fisheries or forests that are collectively owned and used, often suffering from overuse and depletion without proper management