the study of how the allocation of resources affects economic well-being.
Willingness to Pay
buyers maximum price, measures how much that buyer values the good.
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. The benefit buyers receive from the good as the buyers themselves perceive it. benefit buyers receive from participating in a market.
the buyer who would leave the market first if the price were any higher
Area below the demand curve and above the price measures the consumer surplus in a market.
height of the demand curve measures the value buyers place on the good, as measured by their willingness to pay for it
The value of everything a seller must give up to produce a good
The amount a seller is paid minus the cost of production, measures the benefit sellers receive from participating in the market.
Seller who would leave the market first if the price were any lower.
The area below the price above the supply curve measures the producer surplus in a market. Height of the supply curve measures sellers costs and the difference between the price and the cost of production is each seller's producer surplus.
The property of a resource allocation of maximizing the total surplus received by all members of society
The property of distributing economic prosperity uniformly among the members of soceity
The ability to influence prices, keeps price and quantity away from equilibrium
the inability of some unregulated markets to allocate resources efficiently, when markets fail public policy can potentially remedy the problem and increase economic efficiency.
Want to see the other 14 Flashcards in Chapter 7 Consumers, Producers, and the Efficiency of Markets?JOIN TODAY FOR FREE!