Consumer and Producer Surplus

These flashcards cover key concepts related to consumer and producer surplus, willingness to pay, and market dynamics.

Consumer Surplus

The net gain that a buyer achieves from the purchase of a good, calculated as the difference between what the buyer is willing to pay and what they actually pay.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive for that good.

Willingness to Pay

The maximum price at which a buyer is willing to purchase a good, impacting their purchasing decisions.

Demand Curve

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

Supply Curve

A graph depicting the relationship between the price of a good and the quantity supplied.

Total Consumer Surplus

The sum of the individual consumer surpluses achieved by all buyers of a good at a given price.

Individual Consumer Surplus

The consumer surplus experienced by a single buyer, determined by their willingness to pay compared to the purchase price.

Deadweight Loss

The loss of economic efficiency when the equilibrium outcome is not achievable or not achieved, often due to price controls.

Price Ceiling

A maximum price set by the government that can be charged for a good, intended to keep prices affordable.

Price Floor

The minimum price set by the government that can be charged for a good, intended to ensure sellers earn a minimum profit.