EC120 Lecture Notes - Lecture 7: Economic Surplus, Demand Curve, Baltimore City Fire Department

• School: WLU
• Department: Economics
• Course: EC120
• Professor: Hideki Ariizumi

Document Summary

The equilibrium of supply and demand in a market maximized the total benefits received by the buyers and sellers. Welfare economics: the study of how the allocation of resource affects economic wellbeing. Willingness to pay: the maximum amount that a buyer will pay for a good. In a sense, john has found a real bargain: he is willing to pay for the album but pays only for it: we say that john receives a consumer surplus of . Consumer surplus: a (cid:271)u(cid:455)er"s (cid:449)illi(cid:374)g(cid:374)ess to pa(cid:455) (cid:373)i(cid:374)us the a(cid:373)ou(cid:374)t the (cid:271)u(cid:455)er a(cid:272)tuall(cid:455) pays. Consumer surplus is closely related to the demand curve for a product. The table shows the demand schedule for the buyers. The graph shows the corresponding demand curve. Note that the height of the de(cid:373)a(cid:374)d (cid:272)ur(cid:448)e refle(cid:272)ts (cid:271)u(cid:455)ers" (cid:449)illi(cid:374)g(cid:374)ess to pa(cid:455) Be(cid:272)ause the de(cid:373)a(cid:374)d (cid:272)ur(cid:448)e refle(cid:272)ts (cid:271)u(cid:455)er"s (cid:449)illi(cid:374)g(cid:374)ess to pa(cid:455), it (cid:272)a(cid:374) also (cid:271)e used to measure consumer surplus.