ECON 201 Lecture Notes - Lecture 8: Economic Surplus, Deadweight Loss, Marginal Cost

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Econ 201 lecture 8 (chapter 5) - welfare economics, externalities and non- Keyterms: equity: concerns how economy"s benefit (goods, rewards, subsidies, ) should be distributed in the society (related to normative economics, efficiency: address how well the economy"s resources are put into used => highest productivity. Consumer surplus: the difference between the price consumers are willing to pay and what is actually paid. (demand side of the market) Supplier surplus: the difference between the price suppliers are willing to sell and what they are actually given. (supply side of the market) *different from profit. Intergenerational equity: assess whether our actions/policies today are. Use the demand and supply equations given to draw the graph and identify the consumer/supplier surplus area. Use data on the graph to calculate the area. Maximizes the sum of consumer and producer surplus => leave no room for further improvement in financial status of the participants. Marginal benefit (demand) = marginal cost (supply) (makes the largest pie)

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