Economic Efficiency, Taxes, Price Setting

consumer surplus

difference between highest price a consumer is willing to pay for a good or service and the actual price paid

marginal benefit

additional benefit to a consumer from consuming one more unit of good

producer surplus

difference between lowest price a firm would be willing to accept for good/service and the price actually received

marginal cost

change in a firm’s total cost from producing one more unit of a good or service

economic surplus

consumer surplus + producer surplus

deadweight loss

reduction in economic surplus resulting from market not being in EQ

price floor

price set above equilibrium; creates surplus

price ceiling

price set below EQ, creates shortage

forward-shifting tax

tax burden of the consumers

backward shifting tax

tax on the producers

inelastic demand and taxes

more tax burden on consumers

elastic demand and taxes

more tax burden on producers