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Chapter 7

ECN 104 Chapter 7: efficiency of markets
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Department
Economics
Course
ECN 104
Professor
Tsogbadral Galaabaatar
Semester
Winter

Description
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 wellbeing CONSUMER SURPLUS Willingness to Pay A buyers 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 buyers WTP minus the amount the buyer 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 1 Parmida
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