ECON 1000 Lecture Notes - Demand Curve, Avoidance Speech, Externality

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ECON 1000 Full Course Notes
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ECON 1000 Full Course Notes
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Two goals: efficiency: achieving an outcome that results in the greatest possible gain in the aggregate sense. (size of economic pie, equity/ fairness: achieving an outcome that is equitable and fair. (distribution of pie) It is measured by the area under the demand curve and above the price paid, up to the quantity bought. Producer surplus is the price received for a good minus the minimum-supply price (marginal cost), summed over the quantity sold. It is measured by the area below the market price and above the supply curve, summed over the quantity sold. total gain= total surplus = consumer surplus + producer surplus. Inefficiency can occur because too little of an item is produced underproduction or too much of an item is produced overproduction: a deadweight loss equals the decrease in total surplus the gray triangle. (this loss is a social loss. )

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