BA 1310 Lecture 4: Markets in Action - Government Intervention

These flashcards cover key vocabulary from the lecture on government intervention in markets, focusing on concepts like price ceilings, price floors, subsidies, and market failures.

Price Ceiling

A maximum legal price at which a good can be sold, typically placed on essential goods.

Price Floor

A minimum legal price at which a good can be sold, often applied to agricultural products.

Deadweight Loss

The reduction in economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved.

Subsidy

A payment from the government to consumers or producers to encourage the consumption or production of a good.

Market Failure

A situation where the allocation of goods and services is not efficient, often justifying government intervention.

Consumer Surplus

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

Producer Surplus

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

Tax Incidence

The division of the burden of a tax between buyers and sellers in a market.

Welfare Effects

The impact of price controls on the distribution of economic welfare among consumers and producers.

Rent-Seeking Behavior

The practice of individuals or businesses spending resources to gain economic advantages through political means rather than through productive activities.