Consumer Surplus, Producer Surplus, and Market Efficiency

These flashcards cover key concepts related to consumer surplus, producer surplus, and market efficiency, as discussed in the lecture.

Consumer Surplus

The difference between what a buyer is willing to pay for a good and what the buyer actually pays.

Producer Surplus

The difference between what a seller is paid for a good and the cost of providing it.

Market Efficiency

A situation in which all resources are allocated in a way that maximizes total surplus, benefiting society as a whole.

Total Surplus

The sum of consumer surplus and producer surplus in a market.

Welfare Economics

The study of how the allocation of resources affects economic well-being.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded.

Equilibrium Price

The price at which the quantity of a good demanded equals the quantity supplied.

Price Ceiling

A legal maximum price that can be charged for a good.

Price Floor

A legal minimum price that must be paid for a good.

Externalities

Costs or benefits that affect parties who did not choose to incur those costs or benefits.