ECON 10010 Lecture Notes - Lecture 5: Blue Triangle, Making Money, Equilibrium Point
Document Summary
Sellers have a minimum price they are willing to sell for, but they are willing to sell at higher price. Diversity of cost: higher price = might gain sellers: law of demand. Consumers have different (income) opportunities to buy. Max valuation varies due to opportunity and not happiness. The value of consumer surplus = valuation actual price: total consumer surplus (cs): sum of all the individual"s consumer surplus in a market. Problem: sometimes people don"t really know what they want. Producer surplus: making money = profit costs of production, seller"s know their valuation, producer surplus of an individual = Money brought in from purchase cost of production: total producer surplus: Seller"s valuation (ps) is the sum of all producer"s individual surplus in a market. Total surplus (ts) = cs + ps: total surplus is always in units of dollars, one role in economics is to maximize ts, example: Suppose there is a market with 3 sellers and 3 buyers.
