Definition of terms Flashcards
Market
Where buyers and sellers come together to carry out an economic transaction
Demand
Quantity of a good/service consumers are willing and able to purchase
Supply
Quantity of a good/service producers are able and willing to produce
Indirect taxes
Taxes on goods and services that are added to the price of a product
Subsidy
Payments made by the government to firms that reduce their costs of production
Excess demand
More of a good is being demanded at a given price than its being supplied
Excess supply
More of a good is being supplied at a given price than its being demanded
Market equilibrium
Where demand is equal to supply (curves intersect)
Consumer surplus
Additional benefit received by consumers by paying a price that is lower than the
highest price they are willing to pay
Producer surplus
Additional benefit received by producers by selling to a price that is higher than the lowest price they are willing to receive
Social (community) surplus
The sum of consumer and producer surplus
Allocative efficiency
The best allocation of resources for society (in a free market in equilibrium)
PED
A measure of the responsiveness of the quantity demanded of a good to a change in its price (% change in Q / % change in P)
Total revenue
Revenue gained by a firm from the sale of a particular quantity of a good (Q x P)
YED
A measure of the responsiveness of demand for a good or service to a change in the income of consumers (% change in Q / % change in income)
