Quiz #4 Vocab Flashcards Preview

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Flashcards in Quiz #4 Vocab Deck (14):

The optimal distribution of goods and services considering consumer preferences; P=MC

Allocative Efficiency (socially optimal)


Goods and services are received by those who value them most; consumer utility is maximized such that MUa:Pa=MUb/Pb

Distributive efficiency


Optimal production, the firm cannot produce more output with the same level of inputs or the same output with less inputs; MPI/wage=MPk/Rental rate

Productive efficiency (least cost combination of resources)


Quantity demanded will rise when income rises and fall when income falls

Normal goods


Quantity demanded will fall when income rises and ride when income falls

Inferior goods


How the quantity demanded for one good changes when the price of a related good changes; positive for subs, negative for complements

Cross price elasticity


Sensitivity of quantity demanded to changes in income; positive for normal goods, negative for inferior goods

Income elasticity


The increase in consumer satisfaction from consuming one more of a given good or service

Marginal utility


Total satisfaction from consumption of a good or service

Total utility


Benefit consumers get from paying less for a good or service than they are willing to pay; area above equilibrium but below demand curve

Consumer surplus


Benefit to producers from selling a good or service for more than what they are willing to sell; area below equilibrium but above supply curve

Producer surplus


Loss to society when markets are made inefficient; a waste of surplus or benefit that could be avoided

Deadweight loss


Goods made to be used together as one; P of good A and QD for comp go in opposite directions

Complementary goods


Goods used in place of one another; P of good A and QD for sub go in the same direction

Substitute goods