ECON 1B03 Lecture Notes - Deadweight Loss, Economic Equilibrium, Economic Surplus

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coralalligator850

24 Jun 2013

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ECON 1B03 Full Course Notes

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Consumer surplus: the buyer"s willingness to pay for a good minus the amount the buyer actually pays for it. The market demand curve depicts various quantities that buyers would be willing and able to purchase at different prices. The cs can be illustrated as the area under the demand curve above the selling price line. Producer surplus: the amount a seller is paid for a good minus the seller"s cost. It measures the benefit to sellers participating in a market. Cost is a measure of the seller"s willingness-to-sell, which is the lowest price a supplier will take to produce a good and offer it for sale. When a producer receives more than they are willing to take to produce a good, they enjoy a benefit. Cs = value to buyer amount buyer pays. Ps = amount sellers receive cost to sellers. Since amount buyer pays = amount sellers receive. Total surplus = consumer surplus + producer surplus.

Related Questions

Efficiency in a market is achieved when

a. social planner intervenes and sets the quantity of output after evaluating buyers willingness to pay and sellers' costs

b. the sum of producer surplus and consumer surplus is maximized

c. all firms are producing the good at the same low cost per unit.

d. no buyer is willing to pay more than the equilibrium price for any unit of the good.

chocolateantelope690

True or False:

1. Consumer surplus is the buyer's willingness-to-pay minus the seller's opportunity cost of production.

2. If your willingness-to-pay for a hamburger is $3 and you paid $2, then your consumer surplus is $5.00

3. The opportunity cost of production for a seller includes the implicit cost of the seller's time.

4. The height of the supply curve at a selected quantity is the seller's opportunity cost of producing that marginal unit.

5. Total surplus (total well-being) is the seller's cost of production minus the buyer's willingness-to-pay.

6. The competitive market equilibrium outcome is efficient because it allocates the produced output to the buyers who place the highest value on the good

7. Producer surplus is the area above the supply curve and below the price.

8. The competitive market equilibrium outcome maximizes total surplus (total well-being)

9. Producing and consuming more of a good will always increase the total surplus(total well-being).

redelephant805

7) Indicate whether each of the following statements is true or false, and explain why.

A. Producer surplus tends to fall as the supply curve becomes more elastic.

B. Consumer surplus tends to rise as demand becomes more elastic.

C. The market demand curve indicates the minimum price buyers are willing to pay at each level of production.

D. The market supply curve indicates the minimum price required by sellers as a group to bring forth production.

E. Consumer surplus is the amount that consumers are willing to pay for a given good or service above and beyond the amount actually paid.

bronzeoyster264

ECON 1B03 Lecture Notes - Deadweight Loss, Economic Equilibrium, Economic Surplus

ECON 1B03 Full Course Notes

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