Efficiency and Deadweight Loss in Product Markets

These flashcards cover important vocabulary and concepts related to market efficiency, total surplus, deadweight loss, tariffs, quotas, and international trade principles.

Total Surplus

The sum of consumer surplus and producer surplus, indicating the total welfare in the market.

Deadweight Loss

The loss of economic efficiency when the equilibrium outcome is not achievable or not achieved.

Consumer Surplus (CS)

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

Producer Surplus (PS)

The difference between what producers are willing to accept for a good or service and what they actually receive.

Global Market Price

The price at which a product is sold on the international market.

Tariff

A tax imposed on imported goods to increase the market price and revenue.

Quota

A government-imposed limit on the amount of a specific good that can be imported.

Gains from Trade

The increased overall welfare that results from countries engaging in trade by specializing in goods in which they have a comparative advantage.

Inefficiency

A situation where resources are not allocated in a way that maximizes total surplus.

Binding Import Quota

An import limit that is set below the market equilibrium quantity, leading to an increase in prices.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

Economic Principles in Consumer Decisions

Factors like income, preferences, and prices that affect how consumers make purchase decisions.