definitions Flashcards
Demand
Demand is an economic concept that relates to a consumer’s desire to purchase goods and services and willingness to pay a specific price for them.
Supply
Supply is the total amount of a specific good or service that is available to consumers.
Tax (excise or ad valorem)
Indirect tax is imposed on the expenditure of goods and services, paid to the government through producers.
Subsidy
A subsidy is a form of financial aid given by the government, usually to producers in order to (i) reduce the costs of production, (ii) increase output, and (iii) reduce prices.
Price Floor
A price floor is the legal minimum price set by the government for a particular good or service, to protect the income of producers and workers, or to discourage consumption.
Price Ceiling
A price ceiling is the legal maximum price set by the government for a particular good or service to make goods (such as food and rent) more affordable, especially for low-income consumers.
Intervention
Intervention is any action carried out by the government that affects the market with the objective of changing the free market equilibrium / outcome.
Equity
fair distribution of resources and welfare in economy
Elasticity (elastic inelastic)
Elasticity is the tendency for demand, supply, or other factors to change given changes in price.
Allocative Efficiency
which occurs when the marginal benefit equals marginal cost (MB=MC)
Or quanitty supplied = quanitity demanded
Market equilibrium
Market equilibrium is a market state where the supply in the market is equal to the demand in the market
Moral Hazard
a situation in which one party engages in risky behavior or fails to act in good faith because it knows the other party bears the economic consequences of their behavior.
Ceteris Paribus:
“all other things being equal.”
Deadweight loss:
Also described as welfare lost, may be regarded as the cost to society as a result of a inefficient market, or being allocatively inefficient.
