Macro Economics_Chapter 7_Consumers,Producers and Efficiency Marketdjalex035
This chapter discusses consumer surplus, producer surplus, and market efficiency. It defines consumer surplus as the difference between what consumers are willing to pay and what they actually pay. Producer surplus is defined as the difference between what producers are paid and their costs. The market equilibrium maximizes the total surplus, which is the sum of consumer surplus and producer surplus. This allocation of resources through supply and demand is efficient because it maximizes the total benefits to both consumers and producers.
The document discusses contestable markets, where actual and potential competition exists and entry and exit decisions can be made without cost. Conditions for contestability include an absence of sunk costs, access to technology, low consumer loyalty, and low legal barriers. A contestable market may have a low minimum efficient scale and limited scale economies. Policies like deregulation and open access networks can make markets more contestable by reducing barriers to entry and exit. The threat of potential competition in a contestable market can influence incumbent firms' pricing and output decisions similar to a competitive market.
This document provides definitions and diagrams related to macroeconomics concepts including:
- Definitions of macroeconomics, national income, GDP, GNP, real GDP
- Circular flow diagrams showing flows between households, firms, government
- Components of aggregate demand and supply
- Causes of shifts in aggregate demand and short-run aggregate supply
- Business cycles and use of diagrams to illustrate macroeconomic goals
- Unemployment, inflation, and Phillips curve concepts
- Monetary and fiscal policy approaches and their strengths/weaknesses
This document provides an overview of aggregate supply and the short-run tradeoff between inflation and unemployment known as the Phillips curve. It discusses three models of aggregate supply - the sticky-wage model, imperfect-information model, and sticky-price model - and how they each imply a positive relationship between output and the price level in the short run. The Phillips curve relationship is then derived from the aggregate supply relationship. The document also discusses concepts like adaptive expectations, inflation inertia, cost-push vs demand-pull inflation, and the sacrifice ratio.
This document discusses monopolistic competition, including its key characteristics: many firms sell differentiated but substitutable products; there is free entry and exit in the long run; and firms have some market power over price. It provides examples of industries that exhibit monopolistic competition, like clothing, restaurants, and soap. The document also notes both advantages, like diversity and choice for consumers, and disadvantages, like unnecessary advertising spending.
Macro Economics_Chapter 7_Consumers,Producers and Efficiency Marketdjalex035
This chapter discusses consumer surplus, producer surplus, and market efficiency. It defines consumer surplus as the difference between what consumers are willing to pay and what they actually pay. Producer surplus is defined as the difference between what producers are paid and their costs. The market equilibrium maximizes the total surplus, which is the sum of consumer surplus and producer surplus. This allocation of resources through supply and demand is efficient because it maximizes the total benefits to both consumers and producers.
The document discusses contestable markets, where actual and potential competition exists and entry and exit decisions can be made without cost. Conditions for contestability include an absence of sunk costs, access to technology, low consumer loyalty, and low legal barriers. A contestable market may have a low minimum efficient scale and limited scale economies. Policies like deregulation and open access networks can make markets more contestable by reducing barriers to entry and exit. The threat of potential competition in a contestable market can influence incumbent firms' pricing and output decisions similar to a competitive market.
This document provides definitions and diagrams related to macroeconomics concepts including:
- Definitions of macroeconomics, national income, GDP, GNP, real GDP
- Circular flow diagrams showing flows between households, firms, government
- Components of aggregate demand and supply
- Causes of shifts in aggregate demand and short-run aggregate supply
- Business cycles and use of diagrams to illustrate macroeconomic goals
- Unemployment, inflation, and Phillips curve concepts
- Monetary and fiscal policy approaches and their strengths/weaknesses
This document provides an overview of aggregate supply and the short-run tradeoff between inflation and unemployment known as the Phillips curve. It discusses three models of aggregate supply - the sticky-wage model, imperfect-information model, and sticky-price model - and how they each imply a positive relationship between output and the price level in the short run. The Phillips curve relationship is then derived from the aggregate supply relationship. The document also discusses concepts like adaptive expectations, inflation inertia, cost-push vs demand-pull inflation, and the sacrifice ratio.
This document discusses monopolistic competition, including its key characteristics: many firms sell differentiated but substitutable products; there is free entry and exit in the long run; and firms have some market power over price. It provides examples of industries that exhibit monopolistic competition, like clothing, restaurants, and soap. The document also notes both advantages, like diversity and choice for consumers, and disadvantages, like unnecessary advertising spending.