ECON 1B03 Chapter Notes - Chapter 5: Excludability, Economic Equilibrium, Deadweight Loss

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Economic welfare: benefits consumers and firms receive by participating in the market (buying and selling) The demand curve, therefore, depicts the value consumers place on a good; it shoes he maximum amount they would pay to purchase a given quantity of the good. Consumer surplus, cs, for the market is the area under the demand curve above the price consumers pay (pe equilibrium price) How much depends on the producers" costs. The supply curve tells us the lowest price producers will accept to supply a specified amount; this price has to cover the producers" cost to produce that quantity. Producer surplus, ps, is the area under the selling price and above the supply curve, it"s the area of def. Total surplus = consumer surplus + producer surplus. It measures the total benefit enjoyed by consumers and producers in the market.