ECO 1102 Chapter Notes - Chapter 7: Economic Surplus, Espresso, Demand Curve

• School: University of Ottawa
• Department: Economics
• Course: ECO 1102
• Professor: David Gray

Document Summary

Slight diversion back to chapter 4, pages 68-69. In order to examine the underpinnings of the d curve, we have to examine the behaviour of consumers. Market demand is aggregation of the demands of all consumers. The market d curve is the horizontal summation of all of the individuals" demand curves. Figure 4. 2 set all individual d curves adjacent to each other so that they share the same p axis. Under those conditions, one can sum across them. Individual and market demand curves (check page 1 in the middle for both curves) To this end, we define a measure of consumer welfare called consumer surplus, a measure of producer welfare called producer surplus, and a global measure of welfare called total surplus. Definition: welfare economics: not about social assistance or income assistance programs, how the allocation of resources (input and hence outputs) affects economic well-being. Consider well-being of demanders (consumers) and of suppliers (firms)