ECON 1B03 Lecture Notes - Lecture 6: Economic Surplus, Reservation Price, Demand Curve

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4 Mar 2015

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ECON 1B03 Full Course Notes

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Chapter 6: consumers, producers and efficiency in markets. Economic welfare- benefits consumers and producers receive by participating in the market. Willingness to pay- the maximum amount that a buyer would pay for a g/s. Measures the value, aka reservation price, the buyer places on the good. Consumer surplus, cs- the buyer"s willingness to pay for a g/s minus the amount they actually paid. The demand curve depicts the consumers" willingness and ability to pay for a g/s. This is shown as the consumer surplus, cs. It is the area under the demand curve above the selling price ie. (1/2)*b*h = (1/2)*450*50 = ,250. If the price dropped to , then the initial consumers (cbfg) benefit more, and new consumers (deg), are also benefiting. Willingness to sell- the lowest price that a supplier will pay to produce a g/s and offer it for sale. The seller receives more than they are willing to take = benefit.

Related Questions

A demand curve reflects each of the following except the:

a. the willingness to pay for all buyers in the market.

b. value each buyer in the market places on the good.

c. highest price buyers are willing for each quantity.

d. ability of buyers to obtain the quantity they desire.

rosebee618

True or False:

1. Consumer surplus is the buyer's willingness-to-pay minus the seller's opportunity cost of production.

2. If your willingness-to-pay for a hamburger is $3 and you paid $2, then your consumer surplus is $5.00

3. The opportunity cost of production for a seller includes the implicit cost of the seller's time.

4. The height of the supply curve at a selected quantity is the seller's opportunity cost of producing that marginal unit.

5. Total surplus (total well-being) is the seller's cost of production minus the buyer's willingness-to-pay.

6. The competitive market equilibrium outcome is efficient because it allocates the produced output to the buyers who place the highest value on the good

7. Producer surplus is the area above the supply curve and below the price.

8. The competitive market equilibrium outcome maximizes total surplus (total well-being)

9. Producing and consuming more of a good will always increase the total surplus(total well-being).

redelephant805

7) Indicate whether each of the following statements is true or false, and explain why.

A. Producer surplus tends to fall as the supply curve becomes more elastic.

B. Consumer surplus tends to rise as demand becomes more elastic.

C. The market demand curve indicates the minimum price buyers are willing to pay at each level of production.

D. The market supply curve indicates the minimum price required by sellers as a group to bring forth production.

E. Consumer surplus is the amount that consumers are willing to pay for a given good or service above and beyond the amount actually paid.

bronzeoyster264

ECON 1B03 Lecture Notes - Lecture 6: Economic Surplus, Reservation Price, Demand Curve

ECON 1B03 Full Course Notes

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