DefinitionsforMidterm2 - Price elasticity of supply – A...

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Definitions for First Midterm Economics 304K:Principles of Microeconomics Prof. Meg Ledyard Please use these definitions word for word. You may paraphrase, but do so at your own risk. Sometimes what you think means the same does not. There will be no separate definitions section, however, you may be asked to define a word as a part of a longer problem. Consumer Surplus: a buyer’s willingness to pay minus the amount the buyer actually pays Producer Surplus: the amount a seller is paid minus the seller’s costs. Efficiency : The property of a resource allocation of maximizing total surplus received by all members of society. Equity: The fairness of the distribution of well-being among the members of society. Price elasticity of demand – A measure of the responsiveness of quantity demanded to changes in price
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Unformatted text preview: Price elasticity of supply – A measure of the responsiveness of quantity supplied to changes in price Income elasticity of demand – A measure of the responsiveness of quantity demanded to changes in income Cross price elasticity of demand – A measure of the responsiveness of quantity demanded of one good to changes in price of another good Price Ceiling -- A legal maximum on a price that can be charged in the market Price Floor – A legal minimum on the price that can be charged in the market Tax burden – The difference in price that a buyer pays or a seller receives before and after a tax. World Price – The price of a good that prevails in the world market for that good. (Also known as free trade price.) Tariff – A tax on goods produced abroad and sold domestically....
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