Question

Define the following terms and give an example of each.

Making decisions at the margin

Allocative efficiency

Negative technological change

Substitutes in production

Price ceiling

Producer surplus

Efficient market

Answer 1

Making decisions at margin- It means to think about your next step forward. The word “marginal” means “additional.” The first glass of lemonade on a hot day quenches your thirst, but the next glass, maybe not so much. If you think at the margin, you are thinking about what the next or additional action means for you.

Allocative efficiency-Allocative efficiency means that the particular mix of goods a societyproduces represents the combination that society most desires. For example, often a society with a younger population has a preference for production of education, over production of health care.