Level 1 - Economics - Market Efficiency

Market Efficiency

Demand and Supply Curve
-  Demand Curve: 代表 consumer 因享用多一件該物品的 benefit，當數量愈多，可獲得的 benefit 愈少，所以也稱為 Marginal Benefit (MB) curve
-  Supply Curve: 代表 producer 因生產多一件該物品的 opportunity cost，生產得愈多，放棄的其他生產愈多，opportunity cost 愈大，所以也稱為 Marginal Cost (MC) curve
-  Equilibrium: demand curve 與 supply curve intersect 的地方

Consumer and Producer Surplus

Consumer Surplus = benefit to consumer – price

Producer Surplus = price – opportunity cost to producer

Equilibrium à Maximizing the surpluses

Deadweight Loss

Over-production: 生產出比equilibrium 為多的數量 à MC > MB

Under-production: 生產出比equilibrium 為少量 à MB> MC

Reasons of Inefficiency / Deadweight loss

1.  Government Interventions
2.  Monopoly: profit maximizing but not surplus maximizing (discuss later)
3.  External Costs: producer 在計算生產成本時忽略了 social cost
4.  External Benefits: consumer 在購買時只考慮到自己的 benefit，而忽略了對其他人也有benefit
5.  Public Goods and Common Resources

Government Interventions

1.  Price Ceiling

2.  Price Floor

3.  Taxes

4.  Subsidies

5.  Quotas