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VOCAB Chapter 7
Consumers, Producers, and the Efficiency of Markets
Term | Definition |
---|---|
Welfare economics | The study of how the allocation of resources affects economic well-being. |
Willingness to pay | The maximum amount that a buyer will pay for a good. |
Consumer surplus | The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. |
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 seller's cost of providing it. |
Efficency | The property of a resource allocation of maximizing the total surplus received by all members of society. |
Equity | The fairness of the distribution of well-being among the members of society. |
Market failure | The inability of some unregulated markets to allocate resources efficiently. |