CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS – Flashcards
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WELFARE ECONOMICS
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the study of how the allocation of resources affects economic well-being, The study of how the allocation of resources affects economic well-being
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WILLINGNESS TO PAY
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the maximum amount that a buyer will pay for a good, The maximum amount that a buyer will pay for a good
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CONSUMER SURPLUS
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the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it , The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
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MARGINAL BUYER
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the buyer who would leave the market first if the price were any higher
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COST
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the value of everything a seller must give up to produce a good, The value of everything a seller must give up to produce a good
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PRODUCER SURPLUS
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the amount a seller is paid for a good minus the seller's cost of providing it (Producer surplus = Amount received by sellers - Cost to sellers, The amount a seller is paid for a good minus the seller's cost of providing it
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EFFICENCY
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the property of a resource allocation of maximizing the total surplus received by all members of society
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TOTAL SURPLUS
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(value to buyers - amount paid by buers) + (amount received by sellers - cost to sellers) or total surplus = value to buyers - cost to sellers
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EQUALITY
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the property of distributing economic prosperity uniformly among the members of society, The property of distributing economic prosperity uniformly among the members of society
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MARKET POWER
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some markets, a single buyer or seller (or a small group of them) may be able to control market prices. This ability to influence prices is called
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MARKET FAILURE
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the inability of some unregulated markets to allocate resources efficiently
