ECON 2001.01 Lecture Notes - Lecture 6: Scantron Corporation, Deadweight Loss, Economic Surplus

• School: Ohio State University
• Department: Economics
• Course: ECON 2001.01
• Professor: Michelle Mallon

Document Summary

Producer surplus = did sell - willing to sell. Consumer surplus = did pay - willing to pay. Surplus: something that remains above what is used or needed. Marginal cost: the additional cost to a firm of producing one more unit of a good or service. Lowest price a firm will accept for a good or service. Economic surplus if the market is not in equilibrium i. ii. When price is above equilibrium, consumer surplus declines. Yellow = deadweight, red = producer surplus, blue = consumer surplus b. Price ceilings and price floors i. ii. iii. iv. v. Price ceiling: a legally determined maximum price that sellers can charge. Price floor: a legally determined minimum price that sellers may receive. Producers ask for floor, consumers ask for ceiling. Black market: a market in which buying and selling take place at prices that violate govt. regulations d. Economy suffers - deadweight loss i. ii. iii. e.