Welfare Economics and Public Goods Review

These flashcards cover key terms and concepts related to welfare economics, public goods, and their implications for consumer and producer surplus.

What is the definition of welfare economics?

Welfare economics analyzes the allocation of resources and goods to improve social welfare.

What are public goods?

Goods that are non-excludable and non-rival, meaning they are available for everyone to use without depletion.

What is consumer surplus?

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

What is producer surplus?

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

How do demand and supply shifts affect producer and consumer surplus?

Shifts in demand or supply change equilibrium prices, thus impacting the levels of consumer and producer surplus.

What is deadweight loss?

The loss of economic efficiency that occurs when equilibrium for a good or a service is not achieved or not achievable.

How does elasticity affect tax incidence?

The side of the market that is less elastic bears a higher burden of the tax.

What does excludable mean?

A good is excludable if it is possible to prevent individuals from using it.

What does rival mean?

A good is rival if one person's consumption of the good reduces its availability for others.

What is the outcome of negative externalities?

Negative externalities lead to overproduction from society's point of view.

What is the outcome of positive externalities?

Positive externalities lead to underproduction from society's point of view.

Define a quota in the context of trade.

A limit on the quantity of a good that can be imported or exported.

What is the relationship between total surplus and efficient allocation?

Total surplus is maximized when resources are allocated efficiently.

What is a tariff?

A tax imposed on imported goods.

What are winners and losers in international trade?

Winners gain from trade, while losers may suffer economic disadvantages, such as job losses.

What does it mean when a good is both rival and excludable?

This refers to private goods where consumption by one individual prevents another from consuming the same good.

What are common resources?

Goods that are rival but not excludable, leading to potential overuse.