ECON201 Lecture Notes - Lecture 9: Price Support, Price Floor, Import Quota
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ECON201 Full Course Notes
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Recall: the consumer surplus is the area below the demand curve and above the equilibrium price line (or in between the demand curve and the price line) And that producer surplus is the area below above the supply curve and below the price line. We also see that consumer a would pay for a good whose market price is and therefore enjoys a benefit of . consumer b enjoys a benefit of , The demand curve is also the consumer willingness to pay curve and the marginal benefit curve. The supply curve is also the firm"s marginal cost of production curve. And total surplus is maximized in a free market. Also, total surplus measures welfare benefit of a competitive market. Welfare effects - gains and losses to consumers and producers. Change in consumer and producer surplus from price controls.