ECON 1000 Chapter Notes - Chapter 5: Deadweight Loss, Economic Surplus, Avoidance Speech

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Gordana Colby

Document Summary

Individual demand: relationship between quantity demanded and price for single individual price: market demand curve: horizontal sum of individual demand curves. Pizza: pay less for each additional slice, which is valued more. Individual supply: relationship between quantity supplied and price for single producer: market supply: sum of individual supplies; relationship between total quantity supplied and price, market supply curve: horizontal sum of individual supply curves. Is e(cid:272)o(cid:374)o(cid:373)(cid:455)"s (cid:373)a(cid:396)gi(cid:374)al so(cid:272)ial (cid:272)ost (cid:894)m c(cid:895) (cid:272)u(cid:396)(cid:448)e: producer surplus: price of a good minus its opportunity cost of production, summed over the quantity sold, triangular area below market price, but above supply curve. In competitive equilibrium: marginal social benefit (entire society)= marginal social cost, resource allocation is efficient total surplus (= consumer surplus + producer surplus) is maximized. Ideas about fairness divide into 2 approaches: fair results equality of incomes, utilitarianism: (cid:396)esult should (cid:271)e (cid:862)g(cid:396)eatest happi(cid:374)ess fo(cid:396) the g(cid:396)eatest (cid:374)u(cid:373)(cid:271)e(cid:396);(cid:863) (cid:396)e(cid:395)ui(cid:396)es income transfers rich to poor.