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Consumers, producers, and the efificency of markets.docx

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CAS EC 101
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Consumers, producers, and the efficiency of markets - Welfare economics: the study of how the allocation of resources affects economic wellbeing Consumer surplus - Willingness to pay o The maximum price that the buyer would pay is their willingness to pay, measures how much buyer values the good  Buyer willing to buy at less than maximum price and refuse to buy above it o Consumer surplus: amount buyer is willing to pay – what was paid - Using the demand curve to measure consumer surplus o Marginal buyer: the price given by the demand curve shows the willingness to pay of the marginal buyer, the buyer who would leave first if price increased any longer o The area below demand curve and above price is the consumer surplus - What does consumer surplus measure? o Good measure of economic well-being Producer surplus - Cost and
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