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

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pinkjackal290

6 Sep 2018

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Econ chp 7: consumers, producers, and efficiency of markets: buyers always want to pay less and sellers always want to be paid more, welfare economics: the study of how the allocation of resources affects economic well being. Consumer surplus: looking at the benefits buyers receive from participating in a market. Willingness to pay: the maximum amount that a buyer will pay for a good. Also shows how much a buyer values a good: at a price equal to his willingness to pay, the buyer would be indifferent about buying the good. He would be equally happy buying it or keeping his money: consumer surplus: a buyers willingness to pay minus the amount the buyer actually pays. Willing to pay , but pays , consumer surplus is . Using the demand curve to measure consumer surplus the area above below the demand curve and above the price measures the consumer surplus in a market.

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14. Refer to the table below. If the market price is $5.50, the consumer surplus in the market will be a. $15.50. b. $4.50. c. $21.00. d. $3.00. c. None of the above is correct. Five Possible Buyers' Willingness to Pay for Good Z Buyer Willingness to Pay Jane $8.50 James $7.00 Bill $5.50 Jill $4.00 Sarah $3.50

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.

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

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