Chapter 7: Consumers, Producers, and Efficiency of Markets

These flashcards cover essential vocabulary from Chapter 7 regarding consumer and producer behavior, market efficiency, and the concepts of surplus.

Consumer Surplus

The benefit buyers receive from participating in a market, calculated as their willingness to pay minus the amount they actually pay.

Producer Surplus

The benefit sellers receive from participating in a market, calculated as the amount sellers receive for their goods minus their costs of production.

Efficiency

An allocation of resources that maximizes the sum of consumer and producer surplus.

Willingness to Pay

The maximum amount that a buyer will pay for a good.

Total Surplus

The sum of consumer surplus and producer surplus, indicating the overall economic well-being of society.

Equilibrium of Supply and Demand

The situation in a market where the quantity supplied equals the quantity demanded, maximizing total surplus.

Demand Curve

A graphical representation that shows the relationship between the price of a good and the quantity demanded.

Supply Curve

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

Market Failure

A situation in which the allocation of goods and services is not efficient, often due to externalities or market power.

Economic Well-being

The overall financial health and prosperity of a society, often measured through total surplus.