ECON 1B03 Lecture Notes - Lecture 7: Economic Surplus, Externality, Excludability

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Chapter 5:welfare, externalities and public goods chapter 6: government. The benefit that consumers receive when the price they par for a good is less than they place on the good the area of that yellow triangle. The benefit seller receive when the price they receive is more than the bottom-dollar piece they need to produce the area of that red triangle profit. Total surplus = consumer surplus + producer surplus. Total benefit enjoyed by consumers and producers in the market. The surplus that no one gets because the quantity trade in the market is less than equilibrium quantity the area of pink rectangular. Positive externality: the benefit that enjoyed by individuals even they did not pay to receive it. Positive externality in consumption: other people buy something, you enjoy it without any payment. Positive externality in production: when other people produce something, you enjoy it without any payment.

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