ECO 1104 Lecture Notes - Lecture 7: Invisible Hand, Planned Economy, Economic Surplus

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: Gordon Lenjosek

Document Summary

Chapter 7: consumers, producers, and market efficiency: the equilibrium of supply and demand in a market maximizes the total benefits received by buyers and sellers, welfare economics: the study of how the allocation of resources affects economic well-being. Willingness to pay (wtp: willingness to pay: the maximum amount that a buyer will pay for a good, measures how much the buyer values the good. How a higher price reduces cs: there are two reasons for a fall in cs, fall in cs due to buyers leaving market, fall in cs due to remaining buyers paying a higher price. 1: at each quantity, the height of the supply curve is the cost of the marginal seller, the seller who would leave the market if the price were any lower. In a market economy, the allocation of resources is decentralized, determined by the interactions of many self-interested buyers and sellers.