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Consumer Surplus |
The difference between the maximum price consumers are willing and able to pay for a good or service and the price they actually pay. Consumer surplus can also be thought of as the wealth that trade creates for consumers in a market. Consumer surplus is measured in dollars. Graphically consumer surplus is the area below the demand curve and above the equilibrium price, from zero to the quantity traded. |
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Welfare Economics |
A branch of economics that focuses on measuring the welfare of market participants and how changes in the market change their well-being |
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Producer Surplus |
The difference between the price producers receive for a good or service and the minimum price they are willing and able to accept. Producer surplus can also be thought as the wealth that trade creates for producers in a market. Producer surplus is measured in dollars. Graphically, producer surplus is the area below the equilibrium price and above the supply curve, from zero to the quantity traded. |
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Economic Surplus |
The sum of consumer and producer surplus; a measure of the total welfare, or wealth, that trade creates for consumers and producers in a market. Also known as social welfare or total surplus. In graph its "total" |
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Deadweight loss |
The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium. |
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Productive efficiency |
Producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service. |
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Allocative Efficiency |
Producing the goods and services that are most wanted by consumer in such a way that their marginal benefit equals the marginal cost. |
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Price Ceiling |
prices never go above |
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Total Surplus |
Maximized when markets are at equilibrium |
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Marginal cost in allocation is shown as which curve |
supply curve |
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Marginal Benefit in allocation is shown as which curve |
demand curve |
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Loss consumer surplus |
Increase in price times the remaining units sold. Reduction in units traded times the increase in price divided by 2 |
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