the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays. (Demand Line)

the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives. (Supply Line)

We can think about efficiency in a market in terms of:

1. Marginal benefit and marginal cost 2. Consumer surplus and producer surplus

competitive equilibrium

equally— economic efficiency; the economic surplus is maximized

the sum of consumer and producer surplus

A legally determined maximum price that sellers may charge

A legally determined minimum price that sellers may receive

Price ceilings and floors in the USA are uncommon, but include:

• Minimum wages • Rent controls • Agricultural price controls

market in which buying and selling take place at prices that violate government price regulations

When a government imposes price controls:

• Some people are made better off, • Some people are made worse off, and • The economy generally suffers, as deadweight loss will generally occur.

taxes assessed as a particular dollar amount on the sale of a good or service, as opposed to a percentage tax. Example: The US Federal government imposes a 18.4 cents per gallon tax on gasoline sales, as of 2019.

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

price floors because, when binding, price floors increase price above the equilibrium and may increase producer surplus

When the government imposes price floors or price ceilings,

some people win, some people lose, and there is a loss of economic efficiency.

According to economists, an efficient tax is one that

imposes a small excess burden relative to tax revenue it raises

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ECON 2.1

Term	Definition
Consumer Surplus	the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays. (Demand Line)
Producer Surplus	the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives. (Supply Line)
We can think about efficiency in a market in terms of:	1. Marginal benefit and marginal cost 2. Consumer surplus and producer surplus
competitive equilibrium	equally— economic efficiency; the economic surplus is maximized
economic surplus	the sum of consumer and producer surplus
Price ceiling	A legally determined maximum price that sellers may charge
Price floor	A legally determined minimum price that sellers may receive
Price ceilings and floors in the USA are uncommon, but include:	• Minimum wages • Rent controls • Agricultural price controls
black market	market in which buying and selling take place at prices that violate government price regulations
When a government imposes price controls:	• Some people are made better off, • Some people are made worse off, and • The economy generally suffers, as deadweight loss will generally occur.
per-unit taxes:	taxes assessed as a particular dollar amount on the sale of a good or service, as opposed to a percentage tax. Example: The US Federal government imposes a 18.4 cents per gallon tax on gasoline sales, as of 2019.
deadweight loss from a tax	excess burden
Economic efficiency	a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.
Producers favor	price floors because, when binding, price floors increase price above the equilibrium and may increase producer surplus
When the government imposes price floors or price ceilings,	some people win, some people lose, and there is a loss of economic efficiency.
According to economists, an efficient tax is one that	imposes a small excess burden relative to tax revenue it raises

Created by: cupcake1010

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