Welfare economics is the study of how resource allocation affects societal well-being. It examines the benefits buyers and sellers receive from market transactions and how to maximize these benefits for society. Factors that influence welfare include income, employment, education, health, environment, and leisure time. Consumer surplus measures the benefit consumers receive when the price they pay is less than their willingness to pay, while producer surplus is the benefit to producers from selling above their cost of production. These concepts are demonstrated using demand and supply curves to calculate surplus. Market efficiency refers to how well market prices incorporate all available information.
Welfare economics is the study of how resource allocation affects societal well-being. It examines the benefits buyers and sellers receive from market transactions and how to maximize these benefits for society. Factors that influence welfare include income, employment, education, health, environment, and leisure time. Consumer surplus measures the benefit consumers receive when the price they pay is less than their willingness to pay, while producer surplus is the benefit to producers from selling above their cost of production. These concepts are demonstrated using demand and supply curves to calculate surplus. Market efficiency refers to how well market prices incorporate all available information.
Welfare economics is the study of how resource allocation affects societal well-being. It examines the benefits buyers and sellers receive from market transactions and how to maximize these benefits for society. Factors that influence welfare include income, employment, education, health, environment, and leisure time. Consumer surplus measures the benefit consumers receive when the price they pay is less than their willingness to pay, while producer surplus is the benefit to producers from selling above their cost of production. These concepts are demonstrated using demand and supply curves to calculate surplus. Market efficiency refers to how well market prices incorporate all available information.
Welfare economics is the study of how resource allocation affects societal well-being. It examines the benefits buyers and sellers receive from market transactions and how to maximize these benefits for society. Factors that influence welfare include income, employment, education, health, environment, and leisure time. Consumer surplus measures the benefit consumers receive when the price they pay is less than their willingness to pay, while producer surplus is the benefit to producers from selling above their cost of production. These concepts are demonstrated using demand and supply curves to calculate surplus. Market efficiency refers to how well market prices incorporate all available information.
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Competition refers to a situation in a WELFARE ECONOMIC
market in which firms or sellers
study of how the allocation of resources independently strive for the patronage affects economic well-being. We begin of buyers in order to achieve a by examining the benefits that buyers particular business objective like profits, and sellers receive from engaging in sale nor market share. market transactions. We then examine Perfect competition how society can make these benefits as large as possible. is an abstract that occurs in economic Is the study of how the allocation of text books but not in the real world resources affects economic well-being because we all know that it is refers to: impossible to attain in real life. 1. how much of each good is produced is a concept in microeconomics that 2. which producers produce it describes a market structure controlled 3. which consumers consume it entirely by market forces. If and when In general, it refers to how well people these forces are not met, the market is are doing. For example, people’s living said to have imperfect competition. standards are also influenced by factors A flea market or farmer's market are such as levels of health care, and best examples for this. Consider the environmental factors stalls of our crafters or farmers in the market who sell the same products. Factors that influence welfare economics This market environment is Real income – influences potential characterized by a small number of consumption FOR EXAMPLE residential buyers and sellers. There may be little accommodation, goods and services to differentiate between the products that a person acquires. each crafter or farmer sells, as well as Employment prospects – their prices, which are typically set unemployment significant cost for evenly among them. example once a person is hired for a IMPERFECT COMPETITION position or career. Job satisfaction – from the word itself, Exists whenever a market, hypothetical satisfaction at work as important as or real, violates the abstract tenets of income and wage Housing neoclassical perfect competition. In this High income - but unaffordable housing environment, companies sell different diminishes economic welfare. products and services, set their own Education – opportunities to study individual prices, fight for market share, through lifetime Life expectancy and and are often protected by barriers to quality of life – it refers to the access of entry and exit. healthcare, also healthy lifestyle such as Imperfect Competition also known as levels of obesity/smoking rates. Monopolistic Market an industry in Happiness levels – with this, normative which many firms offer a products or judgements on whether people are services that are similar (not a perfect) happy. substitute Environment – it is the economic USING THE DEMAND CURVE TO MEASURE growth that can cause increased CONSUMER SURPLUS pollution, which damages health and living standards in the society. Leisure time – because high wages due to working very long hours also diminishes economic welfare.
CONSUMER SURPLUS
Consumer surplus is measured as the
area below the downward-sloping demand curve, or the amount a consumer is willing to spend for given The demand curve is a graphic quantities of a good, and above the representation used to calculate actual market price of the good, consumer surplus. It shows the depicted with a horizontal line drawn relationship between the price of a between the y-axis and demand curve. product and the quantity of the product Consumer surplus can be calculated on demanded at that price, with the price either an individual or aggregate basis, drawn on the y-axis of the graph and depending on if the demand curve is the quantity demanded drawn on the x- individual or aggregated. axis. is an economic measurement of consumer benefits resulting from PRODUCER SURPLUS market competition. A consumer surplus happens when the price that consumers pay for a product or service is less than the price, they're willing to pay.
WILLINGNESS TO PAY
It's generally expressed as a range to
represent different people's opinions and also the fluctuation over time because willingness to pay can be influenced by a number of factors including: The economy. Since we all is the difference between the actual know that it is the the highest amount price of a good or service–the market your customer is willing to pay for a price–and the lowest price a producer product or service. would be willing to accept for a good. it is the maximum amount that a buyer will pay for a certain good that he/she needs or want. Cost - it is the value of everything a As the equilibrium price increases, the seller must give up to produce a good. potential producer surplus increases. As Willingness to sell - is the opportunity the equilibrium price decreases, cost of producing it, but would sell if producer surplus decreases. Shifts in the price was greater than the cost of the demand curve are directly related producing it. to producer surplus. If demand increases, producer surplus increases USING THE SUPPLY CURVE TO MEASURE THE PRODUCER SURPLUS MARKET EFFICIENCY
refers to the extent that market prices
reflect all available information. investors can only get returns that compensate for time value of money and risks. no such thing as abnormal returns in an efficient market. Here are the 3 forms of market efficiency Refers to how well current prices reflect all available, relevant information about the actual value of the underlying assets. WEAK -I t suggests that today’s stock prices reflect all the data of past prices With supply and demand graphs used and that no form of technical analysis by economists, the producer surplus can be effectively utilized to aid would be equal to the triangular area investors in making trading decisions. formed above the supply line over to SEMI - it is an efficiency theory follows the market price. It can be calculated as the belief that because all information the total revenue less the marginal cost that is public is used in the calculation of production. of a stock's current price, investors cannot utilize either technical or HOW A HIGHER PRICE RAISES PRODUCER fundamental analysis to gain higher SURPLUS returns in the market. STRONG - it is a version of the efficient market hypothesis states that all information—both the information available to the public and any information not publicly known—is completely accounted for in current stock prices, and there is no type of information that can give an investor an advantage on the market. MARKET FAILURE PUBLIC GOODS
A market failure is when there is an The assumption is that private
inefficient distribution of goods and companies and organizations won’t services that leads to a lack of equilibrium in a free market. The law of supply and demand is meant to lead to an equilibrium in prices, and when it does not it indicates a factor in the market has failed. is a situation where free markets fail to allocate resources efficiently. 4 Major Types of Market Failure: 1. Market Power 2. Imperfect Information 3. Public Goods 4. Externalities
THE BENEVOLENT SOCIAL PLANNER
It is an all-knowing, all-powerful, well-
intentioned dictator, the planner wants to maximize the economic well-being of everyone in society. Social Planners study community needs, examine the social impacts of development, and design strategies to enhance and benefit the community.
EVALUATING THE MARKET EQUILIBRIUM
Market equilibrium refers to a situation
where quantity demanded and quality supplied of a good are equal. In other words, market equilibrium is a situation of zero excess demand and zero excess supply