Chapter 7 Flashcards
Reservation Value
the price at which a trading partner is INDIFFERENT between making the trade and not doing so.
Social Surplus
the sum of consumer surplus and producer surplus.
Pareto Efficent
if no individual can be made better off without making someone else worse off.
Price Control
a government restriction on the price of a good or service.
Deadweight Loss
the decrease in social surplus from a market distortion.
Gross Domestic Product (GDP)
the market value of final goods and services produced in a country in a given period of time.
A Coordination Problem
(When the interests of economic agents coincide) bringing agents together to trade arises.
Incentive Problem
When optimizing actions of two economic agents are not alinged.
Equity
distribution of resources across society.
Bilateral Negotiation
a market mechanism where a single seller and a single buyer privately negotiate with bids and asks.
