ECON 103 Lecture Notes - Lecture 6: Economic Surplus, Equilibrium Point, Demand Curve

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ECON 103 Lecture Notes - Lecture 5: Demand Curve, Economic Equilibrium, Equilibrium Point

ECON 103 Lecture Notes - Lecture 6: Economic Surplus, Equilibrium Point, Demand Curve

ECON 103 Lecture Notes - Lecture 7: Economic Surplus, Perfect Competition, Market Failure

Document Summary

Important announcements: using safari for saplingplus can be problematic. Efficiency in markets leads to higher profitability for producers but efficiency should not be the only goal of a market, a market also has to be equitable and fair to ensure the welfare of the people. The equilibrium point in a market is when the quantity supplied of one good is equal to the quantity demanded. Here are some things to consider about equilibrium: the quantity of the commodity is what matters for efficiency, the price is just the market"s way of getting to quantity. Consumer surplus- the total consumer surplus generated by purchases of a good at a given price is equal to the area below the demand curve but above that price. Producer surplus- the total producer surplus from sales of a good at a given price is the area above the supply curve but below that price.

Related Questions

Efficiency in a market is achieved when

a. social planner intervenes and sets the quantity of output after evaluating buyers willingness to pay and sellers' costs

b. the sum of producer surplus and consumer surplus is maximized

c. all firms are producing the good at the same low cost per unit.

d. no buyer is willing to pay more than the equilibrium price for any unit of the good.

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Purpose of Assignment

In Week 2, students will employ the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. Students learn about welfare economics--the study of how the allocation of resources affects economic well-being--and will discover that under most circumstances, the equilibrium price and quantity is also the one that maximizes welfare. Students will review different sources of externalities and a variety of potential cures and will see that while markets are usually a good way to organize economic activity, governments can sometimes improve market outcomes. Students will see how the U.S. government raises and spends money and the difficulty of making a tax system both efficient and equitable.

Assignment Steps

Scenario: Imagine you have been assigned the responsibility of preparing a paper for the governor's next economic conference.

Prepare a 1,050-word paper addressing the following:

Explain why equilibrium of supply and demand is desirable.

Explain the following concepts using the concept of consumer and producer surplus:

Efficiency of markets

Costs of taxation

Benefits of international trade

Discuss how externalities may prevent market equilibrium and the various government policies used to remedy the inefficiencies in markets caused by externalities.

Analyze the difference between the efficiency of a tax system and the equity of a tax system as it refers to the costs imposed on taxpayers using the benefits principles.

Cite a minimum of three peer-reviewed sources, not including your textbook.

Format consistent with APA guidelines.

rosegerbil765

The figure to the right illustrates the market for a breastâ cancer-fighting drug, without which breast cancer patients cannot survive. What is the consumer surplus

in this market?

Consumer surplus is equal to

price times quantity.

âone-half of price times quantity.

infinity.

zero.

None of the above.

How does it differ from the consumer surplus in the markets you have studied up to this point? Unlike in most other examples, in this case,

the highest price a consumer is willing to pay is infinite.

consumer surplus is equal to producer surplus.

the highest price a consumer is willing to pay is greater than the price the consumer actually pays.

consumer surplus is positive.

the highest price a consumer is willing to pay is equal to the price the consumer actually pays.

00QuantityPrice

DemandDemand

SupplySupply

Upper PP

Upper Q

turquoiseyak97

ECON 103 Lecture Notes - Lecture 6: Economic Surplus, Equilibrium Point, Demand Curve

ECON 103 Lecture Notes - Lecture 5: Demand Curve, Economic Equilibrium, Equilibrium Point

ECON 103 Lecture Notes - Lecture 6: Economic Surplus, Equilibrium Point, Demand Curve

ECON 103 Lecture Notes - Lecture 7: Economic Surplus, Perfect Competition, Market Failure

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