ECON-221 Lecture Notes - Lecture 14: Demand Curve, Economic Equilibrium, Perfect Competition

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6 Aug 2020
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Consumers benefit from market exchange otherwise they would not participate: we are going to assume that participation in markets is voluntary (not always the case); no coercion, no power. Consumer surplus = the difference between the amount consumers would be. The difference between your benefit and the cost is the consumer surplus. Consumer surplus = the total area underneath the demand curve but above the market price. Note: the price charged is charged on all units; a consumer does not pay different prices for different units. The base of the triangle is quantity sold. The area of the triangle is the consumer surplus. Cs = x base x height. Producers benefit from market exchange, otherwise they would not participate. Producer surplus = the difference between the amount producers are willing to sell goods for and the price they actually receive (market price)

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