ECON 201 Chapter Notes - Chapter 7: Economic Surplus, Demand Curve, Economic Equilibrium
8 Feb 2017
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Chapter 7: consumers, producers, and the efficiency of markets. Willingness to pay: the maximum amount that a buyer will pay for a good. Measures how much buyer values the good. Consumer surplus: the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. Consumer surplus measures the benefit buyers receive from participating in a market. Using the demand curve to measure consumer surplus. At any quantity, the price given by the demand curve shows the willingness to pay of the marginal buyer, the buyer who would leave the market first if the price were any higher. The area below the demand curve and above the price measures the consumer surplus in a market. Because buyers always want to pay less for the goods they buy, a lower price makes buyers of a good better off.
