AREC 202 Lecture Notes - Lecture 8: Economic Surplus, Reservation Price

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Maximum price consumer would purchase as specific good. To net gain to an individual buyer from the purchase of a good. Equal to the difference between the buyer"s willingness to pay and the price paid. The sum of the individual consumer surpluses of all the buyers of a good. The term consumer surplus may refer to either individual or total consumer surplus. Individual consumer surplus= willingness to pay - price paid. When the price of a good decreases consumer surplus increases. Consumers who already would have purchased the good at the higher price experience a gain in their consumer surplus. New consumers are persuaded to purchase the good at the lower price, and may have consumer surplus. The lowest price at which a seller is willing to sell a good. The net gain to a seller from selling a good. Equal to the difference between the price received and the seller"s reservation price.

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