Price Determination and the Price Mechanism (Edexcel A-Level Economics A): Flashcards
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Practise the cards
10 cards from this deck
Consumer surplus
Consumer surplus
Welfare gained by consumers above price paid for good
Producer surplus
Producer surplus
Benefit firms gain above minimum price they'd accept
Marginal social benefit (MSB)
Marginal social benefit (MSB)
Additional benefit society gains from consuming extra unit
Price mechanism
Price mechanism
Resource allocation via rationing, incentives, and signalling
Three functions of price mechanism
Three functions of price mechanism
Signalling, incentives, and rationing
Laissez-faire
Laissez-faire
Market operates with minimal government intervention
Price signal
Price signal
Price carries info guiding market to equilibrium
Marginal cost
Marginal cost
Cost of producing an additional unit of output
Property rights role in markets
Property rights role in markets
Give legal ownership; essential for market transactions
Effect of price rise on consumer surplus
Effect of price rise on consumer surplus
Reduces overall size of consumer surplus