ECON 1000 Study Guide - Final Guide: Deadweight Loss, Price Ceiling, Economic Surplus

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Sharif Khan

Document Summary

Econ1000 lecture 7 chapter 5: efficiency and equity objectives. Value is what we get; price is what we pay. The value of one more unit of a good/service is its marginal benefit. We measure value as the maximum price that a person is willing to pay. Therefore, a demand curve is a marginal benefit curve. The cost of one more unit of a good/service is its marginal cost, which we can measure as minimum price that a firm is willing to accept. A supply curve of a good/service shows the quantity supplied at each price. A supply curve also shows the minimum price that producers are willing to accept at each quantity. Producer surplus is the price of a good minus the marginal cost of producing it, summed over the quantity sold. Adam smith"s invisible hand idea in the wealth of nations implied that competitive markets send resources to their highest valued used in society.