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Chapter 7

ECN 104 Chapter Notes - Chapter 7: Economic Surplus, Demand Curve, Market Failure


Department
Economics
Course Code
ECN 104
Professor
Tsogbadral Galaabaatar
Chapter
7

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Parmida
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Chapter 7 Consumers, Producers and the Efficiency of Markets
Allocation of resources how much and who produces, which consumers consume it
Welfare Economics the study of how the allocation of resources affects economic well-being
CONSUMER SURPLUS
Willingness to Pay
A uye’s willingness to pay is the maximum amount the buyer will pay for a good. It measures
how much the buyer values the good
At any Q, the height of
the D curve is the WTP of
the marginal buyer, the
buyer who would leave
the market if P were any
higher.
Consumer Surplus a uye’s WTP ius the aout the uye
actually pays CS = WTP P
Total CS = the area under the demand curve above the price
from 0 to Q
How a lower price increases CS
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