ECO 1104 Chapter Notes - Chapter 7: Economic Surplus, Demand Curve, Economic Equilibrium

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: Rebekah Owusu

Document Summary

Chapter 7 - consumers, producers, and the efficiency of markets. Welfare economics: the study of how the allocation of resources affects economic well-being. At the equilibrium price and quantity, the supply and demand markets are maximized with both sellers and buyers receiving the maximum benefits from the market. Consumer surplus: consumer surplus is a buyer"s willingness to pay minus the amount the buyer actually pays. The consumer surplus measures the benefit to buyers of participating in a market. Willingness to pay: the maximum amount that a buyer is willing to pay for a good or service. The consumer surplus is closely related to the demand curve, and shows the benefit of buyers in a marketplace. The price given by the demand curve represents the willingness of the marginal buyer to pay for the good. The marginal buyer is the buyer who would leave the market if the price was any higher.