Economics Lecture on Government Intervention and Price Controls

This set of flashcards covers key concepts related to economic well-being, government intervention, taxation, market failure, and price controls as discussed in the lecture.

Economic Well-Being

The level of material welfare and economic advantage enjoyed by individuals or societies, typically measured by income, consumption, wealth, access to goods and services, and overall efficiency in resource allocation.

Indirect Taxes

Taxes imposed on goods and services, typically paid to the government by the producer or supplier, regarded as a cost of production.

Value Added Tax (VAT)

A tax on goods and services collected at each stage of production where value is added, primarily aimed at generating government revenue.

Demerit Goods

Goods that have negative effects when consumed and cause negative externalities, often discouraged by government intervention.

Market Failure

A situation where markets fail to allocate resources efficiently, resulting in maximized community surplus. Examples include climate change.

Price Ceiling

A maximum price set by the government below market equilibrium to protect consumers and increase affordability of essential goods.

Rationing Problem

The issue that arises when not all consumers can purchase a good due to shortages created by a price ceiling, requiring non-price methods of distribution.

Allocative Efficiency

A situation in which resources are allocated in such a way that maximizes community surplus.

Shortage

A situation where the quantity demanded exceeds the quantity supplied at a given price, often resulting from price ceilings.

Government Revenue

The income generated for the government through taxes, which can be used to fund public goods and services.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit to consumers.

Producer Surplus

The difference between the price at which producers are willing to sell a good or service and the actual price they receive, representing the benefit to producers.