ECON 2010 Lecture Notes - Lecture 9: Laissez-Faire, Opportunity Cost, Market Failure

• School: CU-Boulder
• Department: Economics
• Course: ECON 2010
• Professor: Alexander Hill

Document Summary

Accounting profit: money in minus money out. Economic profit: accounting profit + opportunity cost. Buyer has a value in mind and will not go higher than that. Seller has minimum value and will not go lower than that. Each has earned a surplus of 3. 000$ Willing to pay a high price but didn"t have to. Goal of society is to maximize surplus (welfare economics) Think of it as profit for the consumer. Imagine the equilibrium price shifted from 20 to 10. Cs= * 45 * 90 = 2025$ Difference between price and cost to produce (supply curve) Book manufacturers can produce books for a few dollars each, but sell them for much more. Maximize total surplus = consumer surplus + producer surplus. Said differently: maximize the difference between the value of the good to buyers and the cost to sellers making it.