Price Controls and Economic Welfare

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10 Terms

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Price ceiling

A legal maximum on the price at which a good can be sold

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Price floor

A legal minimum on the price at which a good can be sold

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Consumer surplus

The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

<p>The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it</p>
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Producer surplus

The amount a seller is paid for a good minus the seller's cost of providing it

<p>The amount a seller is paid for a good minus the seller's cost of providing it</p>
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binding price ceiling

below equilibrium

<p>below equilibrium</p>
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non-binding price ceiling

above equilibrium

<p>above equilibrium</p>
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dead weight loss

the fall in total surplus that results from a market distortion, such as a tax

<p>the fall in total surplus that results from a market distortion, such as a tax</p>
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total surplus

consumer surplus + producer surplus

<p>consumer surplus + producer surplus</p>
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shortage

quantity demanded is greater than quantity supplied

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Surplus

quantity supplied is greater than quantity demanded

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