Micro Ch. 7

Front 1

Invisible Hand

Back 1

the idea that the free interaction of people in a market economy leads to a desirable social outcome (adam smith)

Front 2

competitive equilibrium model

Back 2

model that assumes utility maximization on the part of consumers and profit maximization on the part of firms, along with competitive markets and freely determined prices

Front 3

pareto efficient

Back 3

situation in which it is not possible to make someone better off w/out making someone else worse off

Front 4

1st theorem of welfare economics

Back 4

conclusion that a competetive market results in an efficient outcome. sometimes called the "invisible hand theorem" (definition of efficiency used here is pareto)

Front 5

income inequality

Back 5

disparity in levels of income among individuals in the economy

Front 6

deadweight loss

Back 6

loss in producer & consumer surplus due to an inefficient level of production