Microeconomics: Perfect Competition and the Invisible Hand

A collection of vocabulary flashcards covering key concepts related to perfect competition and the invisible hand in microeconomics.

Invisible Hand

The concept that individual self-interests in a free market lead to efficient allocation of resources.

Perfect Competition

A market structure where many firms offer a homogeneous product, leading to efficient outcomes.

Economic Surplus

The sum of consumer and producer surplus, representing the total benefit to society from market transactions.

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 the actual price they receive.

Pareto Efficiency

A situation where no one can be made better off without making someone else worse off.

Social Surplus

The total overall welfare in the economy, calculated as consumer surplus plus producer surplus.

Deadweight Loss

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

Resource Allocation

The process of distributing resources among various uses, driven by market forces in perfect competition.

Equity

The fairness or justice in the distribution of resources and welfare in society.