Textbook Guide Economics: Economic Surplus, Demand Curve

• School: UTSG
• Department: Economics
• Course: ECO101H1
• Professor: all

Document Summary

Welfare economics is the study of how the allocation of resources affects economic well-being equilibrium of a market maximizes the benefits received by parties in a market. Consumer surpluses measure the benefit buyers receive from participating in a specific market. The buyer who would abandon a market first if the price increased any higher is called the marginal buyer. In a graph, the total consumer surplus of all buyers in a market for a good or service is the total area below the demand curve and above the price. Producer surpluses measure the benefit sellers receive from participating in a specific market. The seller who would abandon a market first if the price decreased any lower is called the marginal seller. In a graph, the total producer surplus of all sellers in a market for a good or service is the total area below the price and above the supply curve.