Why Markets are Great: Key Terms

Equity-efficiency trade-off: Refers to the trade-off between ensuring an equitable allocation of resources (equity) and increasing social surplus or total output (efficiency).

Homogenous products: Refers to goods that are identical, and so called perfect substitutes.

Market: A group of economic agents who are trading a good or service, and the rules and arrangements for trading.

Perfectly competitive market: In a perfectly competitive market, (1) sellers all sell an identical good or service, and (2) any individual buyer or any individual seller isn’t powerful enough on their own to affect the market price of that good or service.