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consumer ad producer surplus
vocab ch 4-6
45
Economics
Undergraduate 2
11/08/2009

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Term
willingness to pay
Definition
the maximun price at which a consumer would buy that good
Term
individual consumer surplus
Definition
the net gain to an individual buyer from the purchase of a good. it is equal to the difference betweeen the buyers willingness to pay and the price paid
Term
total consumer surplus
Definition
the sum of the individual consumer surpluses of all the buyers of a good in a market
Term
consumer surplus
Definition
refers to both individual and to total consumer surplus
Term
cost
Definition
the lowest price at which he or she is willing to sell a good
Term
individual producer surplus
Definition
the net gain to an individual seller from selling a good. it is equal to the difference between the price received and the seller's cost
Term
total producer surplus
Definition
the sum of the individual producer surpluses of all the sellers of a good in a market
Term
producer surplus
Definition
refers to both individual and to total producer surplus
Term
total surplus
Definition
the total net gain to consumers and producers from trading in the market. it is the sum of the producer and the consumer surplus
Term
property rights
Definition
the rights of the owners of valuable items, whether resources or goods, to dispose of those items as they choose
Term
economic signal
Definition
any peice of information that helps people make better economic decisions
Term
ineficient
Definition
market is considered ths if there are missed opportunities; some peole could be made better off without making other people worse off
Term
market failure
Definition
occurs hen a market fails to be efficient
Term
price controls
Definition
legal restrictions on high or low a market price may go; it can take two forms-price ceiling or price floor
Term
price ceiling
Definition
maximun price sellers are allowed to charge for a good or service
Term
price floor
Definition
minimum price buyers are required to pay for a good or service
Term
deadweight loss
Definition
the loss in total surplus that occurs whenever an action or a policy reduces the quanity transacted below the efficient market equilibrium quanity
Term
inefficient allocation to consumers
Definition
people who want the good badly and are willing to pay a high price dont get it, and those who are relatively little about the good are only willing to pay a low price do get it
Term
wasted resources
Definition
people expand money, effort, and time to cope with the shortages caused by the price ceiling
Term
inefficiently low quality
Definition
sellers offer low-quality goods at a low price even though buyers would prefer a higher quality at a higher price
Term
black market
Definition
market in which goods or services are brought and sold illegally-either because it is illegal to sell thm at all or because the prices charged are legally prohibited by a price ceiling
Term
minimum wage
Definition
the legal floor on the wage rate, which is the market or price of labor
Term
inefficient allocation of sales among sellers
Definition
those who would be willing to sell the good at the lowerst price are not always those who actually manage to sell it
Term
inefficiently high quality
Definition
sellers offer high-quality goods at high price, even though buyers would prefer a lower quality at a lower price
Term
quantity control (quota)
Definition
an upper limit on the quantity of some good that can be bought of sold. the total amount of th good that can be legally transacted is the QUOTA LIMIT
Term
license
Definition
gives its owner the right to supply a good
Term
demand price
Definition
the price at which consumers will demand that quantity
Term
supply price
Definition
the price at which producers will supply that quantity
Term
wedge
Definition
the price paid by the buyers ends up being higher than that received by sellers
Term
quota rent
Definition
the earning that accrue to the license-holder from ownership of the right to sell the good
Term
price elasticity of demand
Definition
the ratio of the percent change in the quantity demanded to the percent change in the price as we move along the demand curve (dropping the minus sign)
Term
midpoint method
Definition
a technque for calculating the percent change. in this approach we calculate changes in a variable compared with the average or midpoint of the starting and final values
Term
perfectly inelastic
Definition
when the quantity demanded foes not respond at all to changes in the price. when demand is perfectly inelastic, the demand curve is a vertical line
Term
perfectly elastic
Definition
when any price increase will cause the quantity demanded to drop to zero. when demand is perfectly elastic, the demand curve is a horizontal line
Term
elastic
Definition
the price elasticity if demand is greater that 1
Term
unit-elastic
Definition
if the price elasticity of demand is exactly 1
Term
inelastic
Definition
if the price elasticity of demand is less than 1
Term
total revenue
Definition
the total value of sales of a good or service. it is equal to the price multiplied by the quantity sold
Term
cross-price elasticity of demand
Definition
between 2 goods measures the effect o the change in one good's price on the quantity demanded of th other good
Term
income elasticity of demand
Definition
the percent change in the quantity of a good demanded when a consumer's income changes divided by the percent change in the consumers income
Term
income elastic
Definition
if the income elasticity of demand for that good is greater than 1
Term
income inelastic
Definition
if the income elasticity of demand for that good is positive but less than 1
Term
price elasticity of supply
Definition
a measure of the responsiveness of the quantity of a good supplied to the price of that good
Term
perfectly inelastic supply
Definition
when the price elasticity of supply is zero, so that changes in the price of the good have no effect on the quantity supplied
Term
perfectly inelastic supply
Definition
when evven a tiny increase or reduction in the price will lead to very large changes in the quantity supplied so that the price elasticity is infinate
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