Economics Market Efficiency Flashcards

Study Notes

Consumer Surplus

Represents the difference between the highest price consumers are willing to pay and the actual price paid.
Measures the economic benefit or wealth created for consumers when purchasing goods or services.
Graphically illustrated as the area below the demand curve and above the equilibrium price.

Welfare Economics

A subfield of economics dedicated to evaluating and measuring the welfare of individuals in a market.
Examines how market changes impact the well-being of participants.

Producer Surplus

The difference between the price received by producers and the lowest price they are willing to accept.
Indicates the economic benefit or wealth created for producers from market transactions.
Visualized as the area below the equilibrium price and above the supply curve.

Economic Surplus

Represents the total welfare in a market, combining both consumer and producer surplus.
Provides a comprehensive measure of the wealth generated from trade, often referred to as social welfare.

Deadweight Loss

Refers to the loss of economic efficiency when a market is prevented from reaching its competitive equilibrium.
Indicates the value of economic surplus that is unrecoverable due to market distortions or inefficiencies.

Productive Efficiency

Achieving the lowest possible average total cost of production.
Involves utilizing minimal resources to produce goods or services effectively.

Allocative Efficiency

Ensures production aligns with consumer demand, where marginal benefits equal marginal costs.
Focuses on creating the right mix of goods and services that fulfill consumer preferences most efficiently.

Description

Explore key concepts related to market efficiency with these flashcards. Each card provides definitions and insights into terms such as consumer surplus, enhancing your understanding of economic principles. Perfect for students looking to grasp important economic terms.