Economic Efficiency Flashcards
What is Equilibrium pricing?
Is the market price at which the quantity of goods supplied is equal to the quantity of goods demanded in a market. It is the point where the needs of the consumers match the needs of the producers.
What is consumer surplus?
Is the extra satisfaction gained by consumers paying a price that is lower than which they were prepared to pay.
What is producer surplus?
When the price is over and above the amount of money the producer was prepared to accept for that output.
What is a price floor?
Price floor is put above the equilibrium price. It is set to benefit the producer.
Minimum price the producer needs to sell the product.
Set to regulate minimum wage and to control rent.
What is a price ceiling?
It is set underneath the Equilibrium price. It benefits the consumers. The maximum price a producer can charge for a product. There is more demanded then supplied.
