Chapter 7 Flashcards
(12 cards)
welfare economics
the study of how the allocation of resources affects economic well being
allocative efficiency
the value of the output by sellers matches the value placed on that output by buyers
willingness to pay
the maximum amount that a buyer will pay for a good and it measures how much that buyer values the good
consumer surplus
a buyers willingness to pay minus what they actually pay
= value to buyers - amount paid by buyers
the market demand curve
depicts the various quantities that buyers would be willing and able to purchase at different prices
marginal buyer
the buyer who would leave the market first if the price were any higher
cost
the value of everything a seller must give up to produce a good
producer surplus
the amount a seller is paid for a good minus the sellers cost
= amount received by sellers - cost to sellers
marginal seller
the seller who would leave the market first if the price were any lower
total surplus
the sum of consumer and producer surplus
= value to buyers - cost to sellers
market power
ability to influence prices
externalities
side effects, what effects other people as well
