ECON 1B03 Lecture Notes - Lecture 9: Economic Surplus, Reservation Price, Demand Curve

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Document Summary

Topic 5: welfare, externalities, and public gds economic welfare: the bene ts that buyers and sellers get when they participate in the market. Consumer surplus willingness to pay: the top dollar of the measures the value the buyer put on that certain gd also called reser aka reservation price related to the demand curve. How does a change in price a ects cs. 1/2 base x height for area of triangle. Producer surplus: the bene t a producer receives when they get more than their bottom line price willingness-to-sell: lowest price a supplier will take their reservation price the supply curve re ects cost. Ps = area below the selling price and above the supply curve. Consumer surplus = value to buyers (d) - amount buyer pays (p) Producer surplus = amount sellers receive (p) - cost to sellers (s) since amnt buyer pays = amount sellers receive.

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