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Flashcards in Efficiency Deck (15)
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1

Deadweight loss

Avoidable decrease in total surplus caused by a factor preventing the market from producing its optimal output

2

Consumer surplus

The difference between what the consumer was willing to pay and what they actually paid

3

Types of government intervention

Market restrictions, price control, tax, subsidies

4

Price ceiling

Legislated maximum price below equilibrium

5

What is the intention of a price ceiling?

Consumer equity for accessibility to low income earners

6

Price floor

Legislated minimum price

7

What is the aim of a price floor?

Support low income producers, often local agriculture

8

Tax

Compulsory contributions to government revenue

9

What are taxes levied upon?

Goods & services, income, profits

10

Economic theory

Determines the best way to implement tax money

11

Subsidies

Money provided by the government to help reduce costs of goods and services

12

Why are subsidies inefficient?

The cost is greater than total surplus

13

Market restrictions

Limiting the supply of a good

14

Producer surplus

Difference between willingness to receive and what they actually receive

15

Why must consumer and producer surplus be equivalent for an efficient market?

The equilibrium is produced, total surplus is maximised