ECO 2023 Lecture Notes - Lecture 15: Economic Surplus, Economic Equilibrium, Invisible Hand
Document Summary
The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called consumer surplus. Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called producer surplus. Two products that serve similar purposes for a consumer would be referred to as substitutes. When the quantity demanded and quantity supplied in a market are equal, the market is said to be in equilibrium. Graphically, the area that represents the difference between the maximum price consumers were willing to pay for a good and the market price is called consumer surplus. All of the above are functions performed by market prices. It measures the value that a buyer places on a good. The difference between the sales revenue of a business firm and the opportunity cost of the resources required to produce the goods supplied by the firm.
