ECN 104 Chapter Notes - Chapter 4: Market Failure, Economic Surplus, Economic Equilibrium
10 Apr 2017
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A consumers willingness to pay for a good is the maximum price at which he or she would buy that good. Individual consumer surplus is the net gain to an individual buyer from the purchase of a good. Equal to the difference between the buyer"s willingness to pay and the price paid. Surplus is the difference between what he/she is willing to pay and what he/she actually pays. Generated by purchases of a good at given price is equal to the area below the demand curve but about the price. A potential seller"s cost is the lowest price at which he or she is willing to sell a good. Individual producer surplus is the net gain to a seller from selling a good it is equal to the difference between the price receive and the seller"s cost. Totally producer surplus in a market is the sum of the individual producer surpluses of all the sellers of goods.
