ECON 1050 Chapter Notes - Chapter 5: Allocative Efficiency, Marginal Cost, Externality

• School: University of Guelph
• Department: Economics
• Course: ECON 1050
• Professor: Pat Martin

Document Summary

*resources are allocated effiently and in social interest when they are used in way that people value most. Value: what we get the value of one more unit of a good or service is marginal benefit. Willingness to pay determines demand a demand curve is a marginal benefit curve. Individual demand: relationship between the price of a good and the quantity demanded by one person. Market demand: relationship between price of a good and the quantity demanded by all buyers (add the quantities demanded by everyone at a price) *the market demand curve is the marginal social benefit curve (msb: marginal social benefit = sum of marginal benefits that ppl in society receive, each person pays a marginal social benefit equal to price willing to pay. Consumer surplus: excess of the benefit received from a good over the amount payed for it (price of marginal cost) (cid:1867)(cid:1866)(cid:1871)(cid:1873)(cid:1865)(cid:1857)(cid:1870) (cid:1871)(cid:1873)(cid:1870)(cid:1868)(cid:1864)(cid:1873)(cid:1871)=(cid:1853)(cid:1870)(cid:1859)(cid:1866)(cid:1853)(cid:1864) (cid:1854)(cid:1857)(cid:1866)(cid:1857)(cid:1858)(cid:1872) (cid:1842)(cid:1870)(cid:1855)(cid:1857) (cid:1843)(cid:1873)(cid:1853)(cid:1866)(cid:1872)(cid:1872) (cid:1854)(cid:1867)(cid:1873)(cid:1859) (cid:1872)