Economics: Consumers, Producers, and Market Efficiency

These flashcards cover key concepts related to consumers, producers, market efficiency, and production functions in economics.

Utility

The satisfaction or benefit derived by consumers from consuming a product.

Marginal Utility

The additional satisfaction received from consuming one more unit of a good or service.

Diminishing Marginal Utility

The principle that as a consumer consumes more of a good, the additional satisfaction gained from each additional unit decreases.

Willingness to Pay (WTP)

The maximum amount a consumer is willing to spend to purchase a good.

Demand

The relationship between the quantity of a good that consumers are willing to buy and its price.

Consumer Surplus

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

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity supplied.

Producer Surplus

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

Total Surplus

The total benefit to society from the consumption and production of a good, calculated as the sum of consumer and producer surplus.

Production Function

A mathematical relationship that describes the output produced with different combinations of inputs.