ECN 104 Lecture Notes - Invisible Hand, Market Power, Market Failure

• School: Ryerson University
• Department: Economics
• Course: ECN 104
• Professor: Tsogbadral Galaabaatar

Document Summary

How much of each good is produced. Welfare economics studies how the allocation of resources affects economic well-being. First, we look at the well-being of consumers. 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. A: anthony & flea will buy an ipod, chad & john will not. Hence, qd = 2 when p = . Derive the demand schedule: wtp and the demand curve. Consumer surplus is the amount a buyer is willing to pay minus the amount the buyer actually pays: Flea"s cs = 260 = . The others get no cs because they do not buy an ipod at this price. Cs with lots of buyers & a smooth d curve. Exercise 1 consumer surplus: find marginal buyer"s wtp at q = 10, find cs for p = .