Textbook Notes (368,107)
Canada (161,650)
Economics (728)
ECON 1B03 (303)
Chapter 7

Chapter 7

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Usman Hannan

CHAPTER 7: CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS - welfare economics: the study of how the allocation (how much is produced, who produces it, who consumes it) of resources affects economic well-being Consumer Surplus Willingness to Pay - willingness to pay: a buyers maximum capacity of what they will pay - consumer surplus: a buyers willingness to pay minus the amount they actually pay (how much they saved from what they would initially have spent) Using the Demand Curve to Measure Consumer Surplus - the graph shows at any point the willingness to pay of the marginal buyer (the person who would leave the market first if the price were to go any higher) - area under demand curve and above the price shows the consumer surplus - in a staircase shape, with more buyers it becomes more smooth How a Lower Price Raises Consumer Surplus - lower prices for everyone, current buys and new buyers What Does Consumer Surplus Measure? - as buyers see it they are receiving a benefit from the good - consumer surplus reflects the economic well being Producer Surplus Cost and Willingness to Sell - cost is the value of everything the seller must give up to produce a good (opportunity cost) - producer surplus: amount the seller is paid for a good minus the sellers cost Using the Supply Curve to Measure Producer Surplus - similar i
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