COMMERCE 1B03 Chapter Notes - Chapter 7: Opportunity Cost, Demand Curve, Economic Surplus
4 Feb 2014
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Microeconomics chapter 7 (consumer and producer surplus) Welfare economics studies how the allocation of resources affects economic well-being. Willingness to pay amount consumer values good at and maximum amount of money a consumer is willing to buy a good at. Marginal buyer a buyer who would leave the market if the price were any higher (ex. Consumer surplus amount a buyer is willing to pay minus amount buyer actually pays. Consumer surplus = willingness to pay price. If the price decreased from to : Green shaded area represents an addition of cs for initial customers. Blue shaded area represents an addition of cs for new customers. Cost value of everything a seller must give up producing a good, including time (i. e. opportunity cost) Marginal seller a seller who would leave the market if the price were any lower (ex. Producer surplus: amount a seller is paid for a good minus seller"s cost.
