ECON 201 MIDTERM #2 – Flashcards
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welfare economics
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the study of how the allocation of resources affects economic well-being
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willingness to pay
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(WTP) 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
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cost
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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
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Total surplus
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value to buyers - cost to sellers
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efficiency
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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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equality
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the property of distributing economic prosperity uniformly among the members of society
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deadweight loss
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the fall in total surplus that results from a market distortion, such as a tax
