Market Demand
the relationship between the price of a good and the quantity demanded by buyers
Marginal Benefit
the value of one more
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Value
what we get
Price
what we pay
Maximum Price
maximum amount of money a person is willing to pay
Cost
what the producer gives up
Marginal Cost
"minimum price" that a firm is willing to accept
Overproduction
is a social loss
Underproduction
a loss of surplus to society
Deadweight Loss
is a loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable
Market Failure
arises when a market delivers in inefficient outcome (overproduction, underproduction)
The Invisible Hand
term used by adam smith to describe the unintended social benefits of individual self-interested actions
when the efficient quantity is produced...
total surplus is maximized
Consumer Surplus
defined as the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay
Individual Supply
the relationship between the price of a good and the quantity supplied by all producers
Market Supply
the relationship between the price of a good and the quantity supplied by ALL producers
Efficient Quantity
unselfishness, minimizes waste and inefficiency
(MARGINAL BENEFIT = MARGINAL COST)
Producer Surplus
economic measure of the difference between the amount a producer of a good receives and the minimum amount the producer is willing to accept for the good
Utilitarianism
"betterment of society"
philosophy based on moral worth of an action upon the number of people it makes happy.
Efficiency
requires that resources are being used where they are most highly valued
It's Not Fair If The Results Isn't Fair
utilitarianism principal "the greatest happiness for the greatest number"
It's Not Fair If The Rules Aren't Fair
Symmetry Principle
- state enforces laws that protect private property and right to sell it
Common Resource
a resource, such as water or pasture, that provides users with tangible benefits
Free Rider
Someone who consumes a resource without working or contributing to the resource's upkeep.
Natural Monopoly Good
a type of monopoly that exists as a result of the high fixed costs or startup costs of operating a business in a specific industry
Non-rival
does not decrease the quantity available for someone else
Private Good
is a product that must be purchased to be consumed (food, clothing, etc.)
Rival
decreases the quantity available for someone else
Human Capital
The productive knowledge and skills that workers acquire through education, training, and experience.
rent ceiling
when a price ceiling is applied to the housing market
black market
illegal market in which the equilibrium price exceeds the price ceiling. With tight rent ceilings, black market is equal to maximum price renter is willing to pay. With loose enforcement, black market is close to the regulated rent.
Price Floor
government regulation that makes it illegal to charge a price lower than a specified level is called a price floor.
minimum wage
when price floor is applied to the labor market
Tax Incidence
division of the burden of a tax between buyers and sellers.
subsidy
payment made by the government to a producer
production quota
upper limit to the quantity of a good that may be produced in a specified period.
total utility
total benefit that a person gets from the consumption of all the different goods and services
utility
benefit or satisfaction a person gets from the consumption of goods and services
marginal utility
change in total utility that results from a one-unit increase in the quantity of a good consumed
Positive Marginal Utility
all the things that people enjoy and want more of a have a positive marginal utility
consumer equilibrium
situation in which a consumer has allocated all of his or her available income in the way that maximizes his or her total utility [Show Less]