Economics Chapter 4

Willingness to Pay

The maximum price at which a consumer would by that good or service.

Individual Consumer Surplus

The net gain to an individual buyer from the purchase of a good. It's 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.

Consumer Surplus

A term often used to refer to both individual and to total consumer surplus.

Cost

The lowest price at which a seller is willing to sell 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.

Total Producer Surplus

The sum of the individual producer surpluses of all the sellers of a good in a market.

Producer Surplus

Economists use his tern to refer both to individual and to total producer surplus.

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.

Property Rights

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

Economic Signal

Any piece of information that helps people make better economic decisions.

Inefficient

A market or economy is described as this if there are missed opportunities. (Some people could be made better off without making other people worse off.)

Market Failure

Occurs when a market fails to be efficient.