ECO101H1 Chapter Notes - Chapter 4: Economic Surplus, Demand Curve, Price Drop

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ECO101H1 Full Course Notes

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A potential buyer"s willingness to pay is the maximum price at which he or she would buy a good. An individual won"t buy the good if it costs more than this amount but will be eager to do so if it costs less. If price is equal to an individual"s willingness to pay, they are indifferent to buying or not buying. Information used to construct demand schedule - when dealing with small number of consumers, the curve is step shaped, with alternating horizontal and vertical segments, instead of smooth curve, which deals with a multitude of consumers. Each horizontal segment/step - corresponds to one potential buyers willingness to pay. Individual consumer surplus is the net gain to an individual buyer from the purchase of a good. It is equal to the difference between the buyer"s willingness to pay and the price paid.

Related Questions

True or False:

1. Consumer surplus is the buyer's willingness-to-pay minus the seller's opportunity cost of production.

2. If your willingness-to-pay for a hamburger is $3 and you paid $2, then your consumer surplus is $5.00

3. The opportunity cost of production for a seller includes the implicit cost of the seller's time.

4. The height of the supply curve at a selected quantity is the seller's opportunity cost of producing that marginal unit.

5. Total surplus (total well-being) is the seller's cost of production minus the buyer's willingness-to-pay.

6. The competitive market equilibrium outcome is efficient because it allocates the produced output to the buyers who place the highest value on the good

7. Producer surplus is the area above the supply curve and below the price.

8. The competitive market equilibrium outcome maximizes total surplus (total well-being)

9. Producing and consuming more of a good will always increase the total surplus(total well-being).

redelephant805

When a buyer's willingness to pay for a good is equal to the price of the good, the

A) buyer's consumer surplus for that good is maximized.
B) buyer will buy as much of the good as the buyer's budget allows.
C) price of the good exceeds the value that the buyer places on the good.
D) the buyer is indifferent between buying the good and not buying it.

when a buyer’s willingness to pay for a good is equal to the price of the good, the

A. buyer's consumer surplus for that good is maximized.

B. buyer will buy as much of the good as the buyer's budget allows.

C. price of the good exceeds the value that the buyer places on the good.

D. buyer is indifferent between buying the good and not buying it.

amethystsnake23

ECO101H1 Chapter Notes - Chapter 4: Economic Surplus, Demand Curve, Price Drop

ECO101H1 Full Course Notes

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