Term
| willingness to pay (CH 4) |
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Definition
| a consumers "willingness to pay" for a good is the maximum price at which he or she would buy that good |
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Term
| individual consumer surplus |
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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 |
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Term
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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 |
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Term
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Definition
| often used to refer to both individual and to total consumer surplus |
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Term
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Definition
| a sellers "cost" is the lowest price at which he or she is willing to sell a good |
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Term
| individual producer surplus |
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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 |
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Term
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Definition
| in a market is the sum of the individual producer surpluses of all the sellers of a good in a market |
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Term
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Definition
| economists use this term to refer to individual and to total producer surplus |
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Term
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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 |
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Term
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Definition
| the rights of owners of valuable items, whether resources or goods, to dispose of those items as they choose |
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Term
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Definition
| any piece of information that helps people make better economic decisions |
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Term
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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 |
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Term
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Definition
| occurs when a market fails to be efficient |
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Term
| price elasticity of demand (CH.6) |
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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 |
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Term
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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 |
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Term
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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 |
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Term
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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 |
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Term
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Definition
| demand is elastic if the price elasticity of demand is greater than 1 |
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Term
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Definition
| if the price elasticity of demand is less than 1 |
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Term
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Definition
| if the price elasticity of demand is is exactly 1 |
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Term
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Definition
the total value of sales of a good or service.
equal to
Price X quantity sold |
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Term
| cross-price elasticity of demand |
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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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