Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
consumer surplus producer surplus total surplus deadweight loss market failure asymmetric information laissez- price ceiling misallocation of resources price floor | Occurs when one party to a transaction has significantly better information than another party. A maximum price established by government for a product or service. When the price ceiling is set below equilibrium, a shortage results. A minimum price established by government for a product or service. When the price floor is set above equilibrium, a surplus results. The sum of consumer surplus and producer surplus, and a measure of the overall net benefit gained from a market transaction. Occurs when a free market does not lead to a socially desirable outcome. A market that is allowed to function without any government intervention. Occurs when a good or service is not consumed by the person who values it the most, and typically results when a price ceiling creates an artificial shortage in the market. The difference between what consumers (as individuals or the market) would be willing to pay and the market price. It is equal to the area above market price and below the demand curve. The difference between the market price and the price at which firms are willing to supply the product. It is equal to the area below market price and above the supply curve. The reduction in total surplus that results from the inefficiency of a market not in equilibrium. |