Econ Chapter 6 Flashcards Preview

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Flashcards in Econ Chapter 6 Deck (16)
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1
Q

Tax Incidence

A

Analysis of the effect of a particular tax on the distribution of economic welfare / the ultimate burden of a tax

2
Q

How Does Relative Elasticity of Supply and Demand Relate to Tax Incidence?

A
  • If demand has a lower elasticity than supply, consumers will pay most of the tax
  • If supply has a lower elasticity than demand, producers will pay most of the tax
3
Q

Consumer Surplus

A

The monetary difference between the price a consumer is willing to pay for an additional unit of a good and what the consumer actually pays

4
Q

Marginal Willingness to Pay

A

As more of a good is consumed, the willingness to pay falls and the consumer surplus decreases

5
Q

How does a lower price affect consumer surplus?

A

Increases consumer surplus and allows people to buy more units

6
Q

Producer Surplus

A

Difference between what a producer is paid for a good and the cost of production

7
Q

Where on the supply / demand graph is producer surplus?

A

Above the supply line but below the market price line

8
Q

Total Welfare Gains

A

The sum of the producer and consumer surplus

9
Q

Deadweight Loss

A

Net loss of total surplus that results from the misallocation of resources

10
Q

Market Efficiency occurs when?

A

MC=MB

11
Q

What is a need?

A

Something people will give up everything for
No substitutes
Ignores scarcity

12
Q

Utility

A

The relative levels of satisfaction that consumers get from the consumption of goods and services

13
Q

Util

A

One unit of satisfaction

14
Q

Total Utility

A

The total Amount of Satisfaction derived from the consumption of a certain number of units of a good or service

15
Q

Marginal Utility

A

Extra satisfaction generated by an additional unit of a good that is consumed in a particular time period

16
Q

Consumer equilibrium

A

Allocation of consumer income that balances the ratio of marginal utility to the price of the goods purchased