Chapter 7 - Consumers, Producers, and the Efficiency of Markets

consumer surplus

The increase in ________ of existing buyers is the reduction in the amount they pay.

Willingness

________ to pay- the maximum amount that a buyer will pay for a good.

Welfare economics

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

Efficiency

________- the property of a resource allocation of maximizing the total surplus received by all members of society.

Equality

________- the property of distributing economic prosperity uniformly among the members of society.

Total surplus

The sum of consumer and producer surplus

Producer surplus

________- the amount a seller paid for a good minus the sellers cost of providing it.

Free markets

________ allocate the demand for goods to the sellers who can produce them at the lowest cost.

Consumer surplus

________- the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Producer surplus

________ is used to measure the well- being of sellers in much the same way consumer surplus is used to measure the well- being of buyers.

Free markets

________ allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay.

consumer surplus

The difference between buyers willingness to pay and the market price is each buyers ________.

Free markets

________ produce the number of goods that maximize the sum of consumer and producer surplus.