#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4 #summary
Sometimes, government policies interfere with the free working of markets. Examples include price ceilings, price floors, and specific taxes. Whenever the imposition of such a policy alters the free market equilibrium quantity (the quantity that maximizes total surplus), there is a redistribution of surplus between buyers and sellers; but there is also a reduction of total surplus, called deadweight loss. Other influences can result in an imbalance between demand and supply. Search costs are impediments in the ability of willing buyers and willing sellers to meet in a transaction. Brokers can add value if they reduce search costs and match buyers and sellers. In general, anything that improves information about the willingness of buyers and sellers to engage will reduce search costs and add value.
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SUMMARYducer surplus is the difference between the total revenue received by sellers from selling a given amount and the total variable cost of production of that amount. When equilibrium price is reached, total surplus is maximized.
<span>Sometimes, government policies interfere with the free working of markets. Examples include price ceilings, price floors, and specific taxes. Whenever the imposition of such a policy alters the free market equilibrium quantity (the quantity that maximizes total surplus), there is a redistribution of surplus between buyers and sellers; but there is also a reduction of total surplus, called deadweight loss. Other influences can result in an imbalance between demand and supply. Search costs are impediments in the ability of willing buyers and willing sellers to meet in a transaction. Brokers can add value if they reduce search costs and match buyers and sellers. In general, anything that improves information about the willingness of buyers and sellers to engage will reduce search costs and add value.
Economists use a quantitative measure of sensitivity called elasticity. In general, elasticity is the ratio of the percentage change in the dependent variable to the per Summary
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