Externalities

Consumer Surplus

The difference between the price a consumer is willing to pay for a good and the price they actually pay.

Producer Surplus

The difference between the price at which a producer is willing to sell a good and the price they actually receive in the market.

Deadweight Loss

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

Price Ceiling

A government-imposed limit on how high a price is charged for a product, set below the market equilibrium price.

Price Floor

A government-imposed limit on how low a price can be charged for a product, set above the market equilibrium price.

Public Goods

Goods that are consumed by everyone, where consumption by one individual does not decrease availability to others (non-rivalrous) and it is difficult or impossible to exclude anyone from using them (non-excludable).

Free-Rider Problem

A situation where individuals benefit from resources, goods, or services without paying for them, leading to under-provision of those goods or services.

Externality

A consequence of an economic activity that affects third parties who did not choose to be involved in that activity, can be either positive or negative.

Social Marginal Cost (SMC)

The total cost to society of producing one more unit of a good, including private and external costs.

Social Marginal Benefit (SMB)

The total benefit to society from consuming one more unit of a good, incorporating both private and social benefits.

Regulation

Government rules or laws designed to control or manage a particular activity or process, often to correct market failures.

Asymmetry of Information

A situation where one party in a transaction has more or superior information compared to another, often leading to market failure.