ECON 1B03 Chapter 5: Chapter 5
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ECON 1B03 Full Course Notes
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Document Summary
Economic welfare: are benefits that consumers and firms receive by participating in the market. Consumer surplus: the benefit consumers receive when the price they pay for a good is less than the dollar amount they place on the good. Producer surplus: the benefit the sellers receive when the price they receive is more than the bottom-dollar price they need to produce and offer their good for sale. Total surplus = consumer surplus + producer surplus. Total surplus is the consumers (demand) minus the cost to producers (supply) Total surplus is maximized in a perfectly competitive equilibrium. It measures the total benefit enjoyed by consumers and producers in the market. You can only get surplus if you buy or sell a good. Deadweight loss, dwl: is a loss in total surplus when the quantity traded is less than the competitive equilibrium quantity. Cs and ps are the areas when we are in a competitive equilibrium.