# Shared Flashcard Set

## Details

Econ Exam 1
Ch 1-6
22
Economics
09/07/2011

Term
 willingness to pay (CH 4)
Definition
 a consumers "willingness to pay" for a good is the maximum price at which he or she would buy that good
Term
 individual consumer surplus
Definition
 ICS= willingness to pay - price paid   net gain to an individual buyer from the purchase of a good. it is equal to the difference between the buyer's willingness to pay and the price paid
Term
 total consumer surplus
Definition
 sum of the individual consumer surpluses of all the buyers of a good in a market   the total consumer surplus generated by purchases of a good at a given price is equal to the area below the demand curve but above that price
Term
 consumer surplus
Definition
 often used to refer to both individual and to total consumer surplus
Term
 cost
Definition
 a sellers "cost" is 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
 in a market is the sum of the individual producer surpluses of all the sellers of a good in a market
Term
 producer surplus
Definition
 economists use this term to refer to individual and to total producer surplus
Term
 total surplus
Definition
 the "total surplus" generated in a market is 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 owners of valuable items, whether resources or goods, to dispose of those items as they choose
Term
 economic signal
Definition
 any piece of information that helps people make better economic decisions
Term
 inefficient
Definition
 a market or economy is "inefficient" if there are missed opportunities: some people could be made better off without making other people worse off
Term
 market failure
Definition
 occurs when a market fails to be efficient
Term
 price elasticity of demand (CH.6)
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
Term
 midpoint method
Definition
 a technique for calculating the percent change. in this approach, we calculate changes in a variable compared with the average or midpoint of the starting anf final values
Term
 perfectly inelastic
Definition
 when the quantity demanded does 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
 demand is elastic if the price elasticity of demand is greater than 1
Term
 inelastic
Definition
 if the price elasticity of demand is less than 1
Term
 unit-elastic
Definition
 if the price elasticity of demand is is exactly 1
Term
 total revenue
Definition
 the total value of sales of a good or service.  equal to Price X quantity sold
Term
 cross-price elasticity of demand
Definition
 between two goods measures the effect of the change in one good's price on the quantity demanded of the other good. it is equal to the percent change in the quantity demanded of one good divided by the percent change in the other good's price
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