TOPICS
- Market Equilibrium
- Market Equilibrium and Changes in D and S
- Market Equilibrium and Allocative Efficiency
- Price Ceilings, Price Floors, and Allocative
Efficiency
OUTCOMES
Market Equilibrium
Explain the concept of
equilibrium price and quantity.; define equilibrium; find
the equilibrium price and quantity on a supply and demand
schedule and graph
Illustrate graphically equilibrium
price and quantity.
what happens if the price is below
the equilibrium price? If it is above it?
define "shortage" and "surplus"
and explain using a supply and demand graph
the four steps to finding a new
equilibrium when a non-price determinant changes and how
to use them (see the yellow pages)
what happens to the equilibrium
price and quantity if (1) demand increases, (2) demand
decreases, (3) supply increases, and (4) supply
decreases.
Explain and graph the effects of
simultaneous changes in demand and supply on equilibrium
price and quantity
Price ceilings, price floors, and
allocative efficiency
Markets and
Efficiency
define marginal social
benefit and explain why it is often measured by the
demand curve
define marginal social cost and
explain why it is often measured by the supply
curve
explain why allocative
inefficiency occurs where MSB > MSC causing an
underallocation of resources; show on graph using the
MSB=MSC model
explain why allocative
inefficiency occurs where MSB < MSC causing an
overallocation of resources; show on graph using the
MSB=MSC model
Explain how equilibrium achieves
allocative efficiency.
be able to find WHAT WE GET and
WHAT WE WANT the MSB=MSC model graph
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