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Lecture 36

ECON 1010 Lecture 36: Lecture 36

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ECON 1010
Laura K.Brown

OS82 Principles of Microeconomics CHAPTER 7 – Consumers, Producers, and the Efficiency of Markets: 1. Allocation of resources: how much of each good is produced, which producers produce it, and which consumers consume it 2. Welfare economics: the study of how the allocation of resources affects economic well-being o Welfare is referring to economic well-being, not government payout o Maximize total utility = maximizing welfare in a society Consumer Surplus: Willingness to Pay: 1. Willingness to pay: the maximum amount that a buyer will pay for a good o Measures how much the buyer values the good o Disregard the factor of wealth/income 2. Each buyer would be eager to buy a product at a price less than their willingness to pay, would refuse to buy the product at a price more than their willingness to pay, and would be indifferent if the price equals their willingness to pay 3. Consumer surplus: a buyers willingness to pay minus the amount the buyer actually pays o CS = W
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