ECON 1B03 Chapter Notes - Chapter 5: Economic Surplus, Demand Curve, Marginal Cost

• 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) Welfare economics: the study of how the allocation of resources affect economic well-being. Equilibrium p*, q* = results in maximum total welfare for both buyers and sellers. Consumer surplus: the benefit consumers receive when they price they pay for a good is less than the dollar amount value they place on the good. When that lady was supposed to be charged 21. 99 for a poster but got charged 17. 59 because of our system. Instead of "here"s the price-how much do consumers want to buy at that price?" it can be read as. "here"s the quantity- how much would consumers pay per good to buy that much?" In this way, demand curve depicts value consumers place on a good, showing the maximum amount they would pay to purchase a given quantity of the good.