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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.
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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.