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Chapter 7

ECON 1000 Chapter Notes - Chapter 7: Demand Curve, Opportunity Cost, Economic Surplus


Department
Economics
Course Code
ECON 1000
Professor
Troy Joseph
Chapter
7

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ECON 1000
CHAPTER 7: CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS
Willingness to pay
Each buyer’s maximum is called his willingness to pay, and it measures how much that buyer
values the good. People would be eager to purchase the item below the amount that they are
willing to pay. The buyer would refuse to buy the album at a price more than his willingness to
pay. And at a price equal to his willingness to pay, the buyer would be indifferent about buying
the good.
Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the
buyer actually pays for it.
Using the demand curve to measure consumer surplus
At any quantity, the price given by the deand curve shows the willingness to pay of the marginal
buyer, the buyer who would leabe the market first if the price was any higher.
Because the demand curve reflects buyers’ willingness to pay, we can also use it to measure
consumer surplus.
How a lower price raises consumer surplus
Because buyers always want to pay less for the goods they buy, a lower price makes buyers of a
good better off.
What does consumer surplus measure?
Consumer surplus is a good measure of economic well-being if policymakers want to respect
the preferences of buyers.
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