CAS EC 101 Chapter Notes - Chapter 3.1: Economic Equilibrium, Deadweight Loss, Masala Chai

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Neal Becker

Document Summary

. 20, while the marginal cost is only . 80. Firms would only be willing to supply this cup at . 20 which is sh. 40 higher than what consumers would be willing to pay. Consumers would not be willing to pay the price tea sellers would need to receive for any cup beyond the 15,000th. Economic surplus: economic surplus is the sum of consumer surplus and producer surplus. In a competitive market, economic surplus is at maximum if. It is a competitive market - (many buyers and sellers: no government restrictions, market is in equilibrium. Deadweight loss: consider a situation where the price of chai tea is above the equilibrium price. . 20 per cup: the number of cups consumers are willing to buy per day falls from. These cups are nor providing any consumer or producer surplus so economic surplus has declined: deadweight loss - the reduction in economic surplus resulting from a market not being in competitive equilibrium.