Market Efficiency Flashcards
The difference between the maximum price consumers are willing and able to pay for a good or service and the price they actually pay
Consumer surplus
A branch of economics that focuses on measuring the welfare of market participants and how changes in the market change their well-being
welfare economics
Formula for area of a triangle
1/2 its base times height
The difference between the price producers receive for a good or service and the minimum price they are willing and able to accept.
Producer surplus
Graphically, producer surplus is the
area above the supply curve and below the equilibrium price from 0 to the quantity traded
Graphically consumer surplus is the
area below the demand curve and above the equilibrium price from 0 to the quantity traded
The sum of consumer and producer surplus
economic surplus
The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium
deadweight loss
Producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service
productive efficiency
Producing the goods and service that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost.
allocative efficiency; MB of last unit = Marginal cost of last unit
A maximum legal price at which a good, service, or resource can be sold
price ceiling
A minimum legal price at which a good, service, or resource can be sold
price floor
A tax based on the number of units purchased, not on the price paid for a good or service
excise tax
