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ECN 104 (387)
Chapter 7

Chapter 7.docx

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Department
Economics
Course
ECN 104
Professor
Frank Trimnell
Semester
Fall

Description
ECN – Chapter 7 Consumers, Producers, and the Efficiency of Markets  Recall, allocation of resources: o How much of a good is produced o Which producers produce it o Which consumers consume it  Welfare economics: study of how allocation of resources affects economic well-being Consumer Surplus Willing to Pay (WTP)  Willingness to pay: the max. amount a buyer will pay for a good  Consumer surplus: a buyer’s WTP minus the amount the buyer actually pays o The area below the demand curve and above the price measures the consumer surplus Product Surplus  Cost: the value of everything a seller must give up to produce a good (opp. Cost)  Producer surplus (PS): the amount a seller is paid for a goo
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