ECON 1000 Lecture Notes - Lecture 1: Economic Surplus, Economic Equilibrium, Efficient-Market Hypothesis
Document Summary
Learning objectives: willingness to pay and demand curve, what is consumer surplus, cost of producing goods and supply curve, what is producer surplus, market equilibrium and maximizing total surplus. Consumer surplus: willingness to pay (wtp) measures how much the buyer values the good, consumer surplus (cs) is wtp minus the actual amount the buyer pays for it. Example - wtp: bidding for elvis presley album. Example demand curve: with wtp and price, we can derive a demand curve. Example consumer surplus: cs is defined as area below the demand curve and above the price. Example lower p, higher cs: negative relationship. Example - graphic: lower price raises cs. Cs and policy implications: policymakers want to respect the preferences of buyers, policymakers might choose not to care about consumer surplus because they do not respect the preferences that drive buyer behaviour.
