ECON 142 Lecture Notes - Lecture 4: Deadweight Loss, Economic Surplus

• School: University of Kansas
• Department: Economics
• Course: ECON 142
• Professor: Brian Staihr

Document Summary

Read: ch 1, 3, & 4, 102, 104, 105, 106, 109, 108. Inverse demand function: p = a - b*q. Demand function: rearrange for q on the left. Inverse supply function: p = a + b*q. Supply function: rearrange for q on left (often a - #) *when you look at the graph, you"re looking at the inverse* Set equations equal to each other, and find equilibrium q & p at that point. When demand changes, slope doesn"t change, but intercept does. Find new equation and solve it for the new p & q. Seeing that demand is higher in different places with data One may be willing to pay more than they have to. Measure area of the triangle (1/2b * h). Shifting either curve affects the value of consumer surplus, and if it gets bigger, consumers are better off, even if they"re paying a higher price.