EC 201 Lecture Notes - Lecture 11: Economic Surplus, Demand Curve
Document Summary
How to measure the beneit that accrue to consumers and irms from paricipaing in the market. Use the measurement of total surplus and evaluate the outcome and then see the eiciency. Consumer surplus- thirsty so will buy water- your happiness as a consumer. Demand curve shows the willingness to pay: the area above the market price and below the demand curve is the cs- cs is the measure of consumer happiness in dollar terms. Supply curve shows the willingness to supply: the area below the market price and above the supply curve is the ps- measure of producer happiness in dollar terms. Compeiive markers are eicient: they create the greatest possible happiness given society"s scarce resources, government interferences in markets will generally lower total surplus ex eiciency losses from rent control . Without rent control: total surplus to renters and landlords is maximized.
