Chapter 3​
Consumer surplus: The difference between the price that consumers are willing to pay and
the price that they actually have to pay. Consumer surplus is commonly noted as an amount
of money.
Producer surplus: The difference in the price producers receive for the product in
comparison to the price they are willing to sell for.
Price ceiling: Price regulation that establishes the highest price that can be paid legally for
a good or service.
Excess demand: The difference between the quantity demanded and quantity supplied at a
price ceiling.
Transfer: Surplus that moves from producer to consumer or vice versa, as a result of a price
regulation.
Deadweight loss(DWL): The reduction in total surplus that occurs as a result of a market
inefficiency.
Nonbinding price ceiling: A price ceiling that is placed above the equilibrium price, thus
having no impact.
Price floor (Or price support): A price regulation that sets the lowest price that can be paid
legally for a good or service.
Excess supply: The difference between the quantity supplied, and the quantity demanded
at the price floor.
Nonbinding price floor: Price support/floor placed under the equilibrium price.
Quota: A regulation that sets the quantity of a good or service that is provided.
Most of the time placed on limiting the amount of resources that are imported. But can be
used to force companies to make goods as well.
Influences of Taxes.
Tax incidence: The group who pays the tax
Subsidy: A payment by the government to a buyer or seller of a good or service.