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consumer surplus
The economic gain of the buyers of a product, as measured by the cumulative difference between their respective reservation prices and the price they actually paid.
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Deadweight Loss
Reduction in economic surplus that results from adoption of policy.
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demander’s (or buyer’s) reservation price
The highest price a demander will offer in order to obtain a good or service
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invisible hand theory
A theory stating that under carefully specified circumstances, the actions of independent, self-interested buyers and sellers will result in the most efficient allocation of resources.
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Perfectly Competitive Market
a market in which no individual supplier has significant influence on the market price of the product
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price ceiling
A maximum allowable price, specified by law.
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price floor
A minimum allowable price, specified by law.
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price taker (perfectly competitive firm)
A firm that has no influence over the price of the product it sells.
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producer surplus
The economic gain of the sellers of a product, as measured by the cumulative difference between the price received and their respective reservation prices.
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supplier’s (or seller’s) reservation price
The lowest price a supplier will accept in return for providing a good or service.
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total economic surplus
The total economic surplus in a market is the sum of all the individual economic surpluses gained by buyers and sellers who participate in the market..
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