Question

In: Economics

Ch2 1. Please provide definitions and calculations for the following; a. Do you understand how wealth...

Ch2

1. Please provide definitions and calculations for the following;

a. Do you understand how wealth is created, from this text’s perspective, and

b. when there are no more wealth-creating opportunities?

c. how taxes, subsidies, and price controls can impinge on these opportunities?

d. how government supports wealth creation?

e. Can you identify, define, and/or calculate:

f. Efficiency/market-clearing price

g. Buyer surplus

h. Seller surplus

i. Total surplus

j. Price floors/surplus

k. Price ceilings/shortage

l.Do you understand how wealth is created, from this text’s perspective, and

when there are no more wealth-creating opportunities?

m. how taxes, subsidies, and price controls can impinge on these opportunities?

n. how government supports wealth creation?

2. Can you identify, define, and/or calculate:

Efficiency/market-clearing price

Buyer surplus

Seller surplus

Total surplus

Price floors/surplus

Price ceilings/shortage

Testbook is ;

Managerial Economics

Froeb Chapters 2

Expert Solution

Market clearing price - It is the price where quantity demanded by consumers is equal to the quantity supplied by the seller.

Buyer surplus - Buyer surplus is known as consumer surplus. It is the difference of the price which consumer is willing to pay for the good and the actual price of the good. It is the area below demand curve and above market price.

Seller surplus - It is known as producer surplus. It is the difference of the price at which seller is willing to sell their product and the actual price of the good. It is the area above supply curve and below market price.

Total surplus - It is the sum total of consumer and producer surplus. It is the total surplus attained by the consumers and producers at the given market price.

Price Floor: When government fixes the price of a product at a level higher than equilibrium price, it is called support price. As a result, the supply becomes in excess of demand. Support price is the minimum guaranteed price at which producers can sell their output to the government if so desired. The main consequence of support price is that consumers have to pay a higher price for the good. On the other hand, the income of the producers goes up. The aim of support price is to insulate the farmers from fluctuations in their income which are caused by price variations in the free market.

Price Ceiling: When government fixed price of a product at a level lower than the equilibrium price, the price is called control price or price control by the government. This is done to control the interest of the consumers. The implication or consequence of price control are as follows:

Rahul Sunny answered 1 year ago

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