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difference between highest price a consumer is willing and able to pay and the price actually payed.
extra benefit to a consumer from consuming an additional unit of a good (derives demand)
difference between lowest price a firm is willing to recieve and the price actaully recieved. area above the supply curve and below equillibrim
additional cost to a firm producing an additional unit of output.
sum of consumer surplus and producer surplus; most economically efficient.
permenant disequillibrium prices
fixed at a level above or below natural equilibrium
dead weight loss
reduction in economic surplus resulting from a market not being in equilibrium.
fixed at level above equillibrium
fixed at level below equilibrium
adam smith, economy a self-regulating machine
uneployment and inflation inversely related
common errors of thought
fallacy of composition (false claim, good for one good for all)
association-is-causation (after the fact therefore becuase of the fact)
ignoring secondary effects
why economists disagree
problem of data
problem of complexity
chapter 1 and 4