chapter4 Flashcards
welfare economics
the study of how an allocation of goods and resources affects the economical welbeing
subjective wellbeing
the way poeple evaluate there own wellbeing/ happiness
objective wellbeing
measures the quality of life using specified indicators
allocative efficiency
measure of satisfaction derived from the allocation of recources
willingness to pay
maximum amount that a buyer will pay for a good
consumer surplus
buyers willingness to pay minus the amount the buyer actualty pays
reservation price
minimum price for which a supplier will offer a certain quantity of a good, willingness to sell
producer surplus
the amount that a seller gets for a good minus the sellers cost
efficient
maximizes total surplus in the economy
free market
gives incentive to change behaviour to move to an efficient allocation & produces the quantity of goods to maximize total surplus
pareto efficiency
when it is not possible to reallocate resources in such that one person is better off without making anyone else worse off.
pareto improvement
when an action makes at least one economic agent better of without harming another economic agent
the invisible hand
from self- interested actions of individuals beneficial social and economical outcomes may arise & government intervantions distorts economy and results in inefficient outcomes
equity
how pie (profit) is allocated to the various economic agent and whether this allocation is fair.
GDP
Gross Domestic Product, market value of final goods and services produced in a given county and in a give period of time
