Government Intervention

These flashcards cover key terms and concepts related to government intervention in markets, including price ceilings and floors, taxes and subsidies, and their effects on welfare.

Price Ceiling

A maximum legal price at which a good can be sold.

Price Floor

A minimum legal price at which a good can be sold.

Deadweight Loss

The loss in total welfare that occurs when the quantity of a good traded is below the market equilibrium quantity.

Subsidy

A payment from the government to the buyer or seller that lowers the price of a good.

Tax Incidence

The distribution of the tax burden between buyers and sellers.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

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

Market Failure

A situation in which the allocation of goods and services by a market is not efficient.

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to a change in price.

Welfare Effects

The changes in consumer and producer surplus resulting from market intervention.