Economics: Chapter 4- Consumer and Producer Surplus

inefficient

A market or an economy is ____ if there are missed opportunities: some people could be made better off without making other people worse off.

individual consumer surplus

The net gain to an individual buyer from the purchase of a good. It is equal to the difference between the buyer's willingness to pay and the price paid.

total consumer surplus

The sum of the individual consumer surpluses of all the buyers of a good in a market. Equal to the area below the demand curve, but above the price.

total producer surplus

The sum of the individual producer surpluses of all the sellers of a good in the market. Equal to the area above the supply curve but below the price.

economic signal

any piece of information that helps people make better economic decisions

market failure

occurs when a market fails to be efficient

producer surplus

refers to both individual and total producer surplus

consumer surplus

refers to individual and consumer surplus

cost

the lowest price at which a seller is willing to sell their good

willingness to pay

the maximum price at which a consumer is willing to buy a good

individual producer surplus

the net gain to an individual seller from selling a good. It is equal to the difference between the price received and the seller's cost

property rights

the rights of owners of valuable items, whether resources or goods, to dispose of those items as they choose

total surplus

the total net gain to consumers and producers from trading in the market. It is the sum of the producer and the consumer surplus.