Textbook Notes (363,452)
Economics (78)
ECON 1010 (38)
Chapter 5

# Chapter 5.docx

3 Pages
117 Views

School
University of Lethbridge
Department
Economics
Course
ECON 1010
Professor
Pascal Ghazalian
Semester
Fall

Description
Chapter 5: Efficiency and equity Efficency- A Refresher - An efficient allocation of resources occurs when we produce the goods and services that people value the most highly. - Resources are allocated efficiently when it is not possible to produce more of a good or service without giving up some other good or service that is valued more highly. - Efficiency is based on value, which is determined by people’s preferences. - If the marginal cost of a good equals its marginal benefit, resources are being used efficiently. Value, Price and Consumer Surplus - The value of one more unit of a good or service is its marginal benefit, which we can measure as the maximum price that a person is willing to pay - A demand curve for a good or service shows the quanitiy demanded at each price - A demand curve also shows the maximum price that consumers are willing to pay at each quantity. - The figure shows these two ways of interpreting a demand curve. o A) The demand curve tells us quantity that consumers plan to buy at a given price. o B) The demand curve tells use the maximum price that consumers are willing to pay for a given quantity. This price measures the marginal benefit of a good at a given quantity - Consumer surplus is the value of a good minus the price paid for it, summed over the quantity bought. o It is measured by the area under the demand curve and above the price paid, up to the quantity bought. - The price paid is the market price, which is the same for each unit bought. - The quantity bought is determined by the demand curve, and the blue rectangle show the amount paid for pizza. - The green triangle shows the consumer surplus from pizza. - The consumer surplus on the 10 slice is the \$2 that the consumer is willing to pay minus the \$1.50 that she does pay, which is 50 cents a slice Cost, Price and Producer Surplus - The cost of one more unit is its marginal cost which we can measure as minimum price that a firm is willing to except. - A supply curve of a good or service shows the quantity supplied at each price. A supply curve also shows the minimum price that producers are willing to accept at each quantity. - The figure shows two ways of interpreting a supply curve
More Less

Related notes for ECON 1010

OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.