Week 3- Consumers, Producers, and the Efficiency of Market Problem Set Flashcards Preview

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Flashcards in Week 3- Consumers, Producers, and the Efficiency of Market Problem Set Deck (12):
1

Efficiency-

When total surplus is maximized.

2

Welfare economics-

Study how allocation of resources affect economic well-being.

3

Consumer surplus-

Amount buyer willing to pay - amount buyer actually pay.

4

Willingness to pay-

Measures the value that a buyer places on a good.
Ex: Each buyers has a minimum amount to bid.

5

Market power-

Ability of market participants to influence price.

6

Producer surplus-

Amount a seller is paid - cost of production.

7

Total Surplus-

Consumer surplus + producer surplus.

8

Externalities-

Side effects passed on to a party other than buyers and sellers.

9

Seller's opportunity cost measures-

value of everything she must give up.

10

Normative analysis-

Being subjective, judging, theoretical scenarios.

11

Marginal seller-

Seller who would leave market first if price were any lower.

12

Marginal buyer-

Buyer who leave market first if price were any higher.