| Question | Answer |
| Define allocative efficiency | Allocative efficiency exists where when the sum of consumer and producer surpluses are maximized.
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At which point of the demand and supply model is the point of allocative efficiency? | At the equilibrium point.
| Define consumer surplus | The difference between what consumers are willing to pay and the price they actually pay.
| Define producer surplus | The difference between the price producers are willing to receive and the price they actually receive.
| Define deadweight loss | The DWL represents the loss of consumer and producer surplus (welfare) that is not gained by another party.
| Define subsidy | A subsidy is a payment by the government to producers to reduce their costs of production.
| Another name for a maximum price? | price ceiling
| Another name for a minimum price? | price floor
| What are the four non-price factors that cause the demand curve to shift? | TICS
| What are the non-price factors that cause the supply curve to shift? | PETROLCC (political, environmental, technology/productivity, restrictions on trade, other related goods, legal, cost of production, cultural.
| Define tariff | A tax on imports.
| What is a direct tax? | A tax on income.
| Trade between countries without government intervention is called? | free trade
| Define exports | Goods produced domestically which are sold to the overseas market
| What does GDP stand for? | Gross Domestic Product
| What's the term when individuals, groups and producers rely on each other to provide what they cannot provide for themselves? | interdependence
| Where quantity supplied by producers equals quantity demanded by consumers is termed.... | market equilibrium
| What are demerit goods? | Goods considered to be harmful to the consumer when consumed.
| Explain elastic Price Elasticity of Demand? | When a change in price leads to a more than proportional change in the quantity demanded.
| Explain inelastic Price elasticity of Demand? | When a change in price leads to a less than proportional change in the quantity demanded. |
