ECO130 - Topic 5
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Change in Demand
Shift of the demand curve.
Change in Quantity Demanded
Movement along the demand curve.
A legally established maximum price a seller can charge.
Price ceiling below equilibrium = black market
A legally established minimum price a seller can be paid.
Price floor above equilibrium = unemployment
The price system fails to operate efficiently, creating a problem for society.
- - Lack of competition
- - Externalities
- - Public goods
Lack of Competition
There must be competition among both producers and consumers for markets to function effectively.
A cost or benefit imposed on people other than the consumers and producers of a good or service.
If present, market failure gives incorrect price and quantity signals and, as a result, resources are misallocated.
A good or service that, once produced, has two special properties.
- - Users collectively consume benefits
- - There is no way to prevent people who do not pay from consuming the good or service
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