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 PARETO IMPROVEMENT: Based on the Pareto efficiency criterion, the notion that an action improves efficiency if it is possible for one person to benefit without anyone else being harmed. A Pareto improvement is possible if the economy has idle resources or market failures. With idle resources, more production is possible to help some without hurting others. With market failures, corrective actions can eliminate deadweight loss that can then be use for benefits economy-wide. A contrasting condition for attaining efficiency is the Kaldor-Hicks improvement.
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 Lesson 6: Supply | Unit 2: Law of Supply Page: 5 of 19

 Topic: Definition <=PAGE BACK | PAGE NEXT=>

The law of supply is the basic principle underlying supply.

A definition:

The law of supply is a direct relationship between supply price and the quantity supplied, ceteris paribus.

• Direct relationship means that people sell more of a good if the price is higher and less if the price is lower.
• The law of supply is not as rigid as the law of demand. The price and the quantity supplied are not always directly related. Higher prices could cause an increase or a decrease in the quantity supplied.
Ceteris paribus is also important to the law of supply.
• Ceteris paribus means other things remain unchanged.
• Law of supply applies exclusively to the relationship between supply price and quantity supplied.
• All other things that can affect supply must remain constant to avoid distorting this relationship.
• Because supply is affected by many factors other than price, the price/quantity supply relationship can get lost when other things change.
• Other factors that affect supply are called supply determinants.

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MIDPOINT ELASTICITY FORMULA

A simple technique for calculating the coefficient of elasticity by estimating the average elasticity for discrete changes in two variables. The distinguishing characteristic of this formula is that percentage changes are calculated based on the average of the initial and ending values of each variable, rather than initial values. An alternative technique is the endpoint elasticity formula.

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 A communal society, a prime component of Karl Marx's communist philosophy, was advocated by the Greek philosophy Plato.
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 ACVActual Cash Value
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