ECO 2013 Lecture Notes - Lecture 8: Deadweight Loss, Economic Surplus, Demand Curve
Document Summary
The difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay. The area above the equilibrium on a supply and demand graph. Consumer surplus = maximum price willing to pay - the actual price. The demand curve can also be defined as: A producer surplus is a difference between how much of a good the producer is willing to supply versus how much he receives in the trade. The difference or surplus amount is the benefit the producer receives for selling the good in the market. "total surplus" refers to the sum of consumer surplus and producer surplus. The supply curve can also be defined as: Focuses on the optimal allocation of resources and goods and how the allocation of these resources affects social welfare. Why welfare analysis is referred to as welfare analysis.
