A legally imposed highest price that can be charged for a product. It is set below the market equilibrium price because this will keep the price from getting to equilibrium and will cause changes in the quantity buyers and/or sellers wish to buy and sell
Binding Price Floor
A legally imposed lowest price that can be charged for a product. It is set above the market equilibrium price because this will keep the price from getting to equilibrium price and will cause changes in the quantity buyers and/or seller wish to buy and sell
Buyer's Price (Pb)
Amount of money directly from the buyer's pocket. Price is generally the same as Ps but differs if tax or subsidy is imposed.
Consumer's Reservation Price
Highest price a consumer is willing to pay for a product
Amount of economic surplus earned by buyers when they purchase and consume a product. It is the difference between the buyer's reservation price and price consumers actually pay.
Deadweight Loss (DWL)
This is the reduction in economic surplus that results from the misallocation of resources.
When resources are used in their best interest for society. Producers and Consumers are the most efficient
When the market fails to give us the most economically efficient use of resources and fails to give the creates economic surplus for society.
A legal maximum on the price at which a good can be sold.
A legal minimum on the price at which a good can be sold
Amount of surplus earned by sellers when a product is produced. Difference between price received by seller and seller's reservation price.
When a market doesn't allow for all producers and consumers to benefit, a system is created to make sure all consumers have the potential to benefit from the good. In a Free Market System, price is used to ration goods
A form of price ceiling. The government imposes it to keep the price of housing down
Resource Misallocation (RM)
Occurs when resources do not get used in their best place. This means these resources are not being used in a way to produce the most economic surplus for society.
Producer's Reservation Price
Lowest price a seller is willing to accept for the production and sale of a product.
Amount of money that goes directly into the seller's pocket. Generally the same as the buyer's price, although the two prices will differ if the government imposes taxes or subsidies on the market.
Occurs when someone (usually the government) provides a buyer or a seller with a payment when a product is bought or sold.
Occurs when someone (usually the government) makes a buyer or seller pay additional money to it when a product is bought or sold.
Occurs when the government imposes a tax on a market, forcing the buyers price to differ from the sellers price. Equal to the amount of the tax per unit.
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