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welfare economics
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willingness to pay
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Macro Chapter 4
| Term | Definition |
|---|---|
| welfare economics | the branch of economics that studies how the allocation of resources affects economic well-being (page 152) |
| willingness to pay | the maximum price a consumer will pay for a good; also called the reservation price (page 153) |
| the reservation price | willingness to pay |
| consumer surplus | the difference between the willingness to pay for a good (or service) and the price that is paid to get it (page 153) |
| willingness to sell | the minimum price a seller will accept to sell a good or service (page 155) |
| producer surplus | the difference between the price that the seller receives and the price at which the seller is willing to sell a good or service (page 155) |
| total surplus | the sum of consumer surplus and producer surplus; a measure of the well-being of all participants in a market, absent any government intervention |
| social welfare ( | total surplus |
| efficient | describing an outcome when allocation of resources maximizes total surplus (page 160) |
| equity | the fairness of the distribution of benefits among the members of a society (page 160) |
| excise taxes | taxes levied on a particular good or service (page 163) |
| incidence | the burden of taxation on the party who pays the tax through higher prices, regardless of whom the tax is actually levied on (page 163) |
| deadweight loss | the decrease in economic activity caused by market distortions (page 166) |
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v.virgil
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