Economincs Chaoter 4: Economic Efficiency

Surplus

Is something that reamins above what is used or needed

Consumer Surplus

Highest price a consumer is willing to accept for a good or service and the actual price the consumer pays

Producer Surplus

Lowest price a firm is willing to accept for a good or service and the price it actually receives

Marginal Benefit

Additional benefit to a consumer from consuming one more unit of a good or service

Economic Surplus

A market maximizes the sum of consumer and producer Surplus, a net benefit to consumers and firms

Economic Efficiency

Market outcome where the is marginal benefit to consumers of the last unit produced is equal to its marginal cost of production

Dead weight Loss

Reduction in economic Surplus resulting from a market not being in competitive equilibrium

Price Celling

Maximum price that sellers can change

Price Floor

Minimum price that sellers may receive

Examples of price ceilings and price floors

Minimum Wages

Rent controls

Agricultural Price Controls

Black Market

Market in which buying and selling are occurring at prices that village government price regulations

Tax Incidence

Division of the burden of a tax between buyers and sell