Class Notes (807,344)
Canada (492,711)
AGEC 200 (18)


3 Pages
Unlock Document

McGill University
Agricultural Economics
AGEC 200
Anwar Naseem

Chapter 6- Do not have to worry about the beginning of the chapter (marginal utility, etc.) Midterm Discussion: 1st short answer question: 40 L of gas - perfectly inelastic - no matter what the price is, you still want the same amount $40 of gas - very elastic/perfectly elastic Chicken vs. Hamburgers
 The price of chicken increased. Chicken and hamburger are substitutes in demand. Market for hamburger = shift in demand to the right. Simultaneous shift in supply and demand. - We get 5 points for the crude oil question anyways. Efficiency of Markets and Welfare Economics - Chapter 6 2) Welfare Economics - Trying to understand how people’s satisfaction is improved by allocation of resources. - Why do we consume what we consume and how does it affect our wellbeing - Which consumers get to consume and why? - Which sellers get to sell and why? - Welfare economics tells us whether or not a market is efficient. - Competitive market where allocation is efficient. Welfare/efficiency go 
ominimum wage laws and price ceilings, 
tc3)It’s not the absolute money that you have it’s the relative money, as compared to your family members/neighbours, etc that tends to make you h
pp4)By and large, people in wealthier countries are more likely to answer in a survey that they are happy. - Money allows you to buy healthcare, food, housing, etc
 5) Willingness to Pay (WTP)
 A buyer’s willingness to pay for a good is the maximum amount the buyer will pay for that good.
 WTP measures how much the buyer values the good.
 Example: 4 buyers’ WTP for an iPod
 Anthony $250, Chad $175, Flea $300, John $125
 Q: If the price of iPod is $200, who will buy an iPod, and what is the quantity demanded? A: 2 of them will be willing to buy them (Anthony and Flea), 2 will not (John and Chad
.7)Derive the Demand Schedule P who buys Qd 301 & up nobody 0 Chapter 6- Do not have to worry about the beginning of the chapter (marginal utility, etc.) who P buys Qd 251-300 1 176-250 2 126-175 3 0-125 4 The graph has a staircase shape, with 4 steps - one per buyer
 If there were a huge # of buyers, it would smooth out into a curver
 10 - At any Q, the height of the D curve is the WTP of the marginal buyer, the buyer who would leave the market if P were any higher.
 The lower the price, you can accommodate the extra (marginal) consumer.
 11 - Consumer surplus - the difference in the willingness to pay and what you actually end of paying (the market value of the good/service). It’s basically your savings. Your happiness/wealth increases as a result CS = WTP - P *** You never have a negative consumer surplus. You only get a surplus when you buy the good/service, not when you decide not to buy it due to its price being too high.
 12- Consumer surplus for the whole market is the sum of each individual consumer surplus for a good. If the price of the good decreases, (the willingness to pay stays the same), consumer surplus increases. - People who were willing to pay the previous price save more money than they would 
 have previously (more consumer surplus) - People who were not willing to pay the previously higher price, but they are willing
tobuy the good at the new price now, also contribute to the consumer surplus now, as 
 14 - CS with Lots of Buyers and a Smooth D Curve
 Downward Sloping D
 At Q=5 (thousand), the marginal buyer is willing to pay $50 for a pair of shoes. AKA at
More Less

Related notes for AGEC 200

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.