01:220:102 Chapter Notes - Chapter 4: Economic Surplus, Demand Curve

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: M.Elgawly

Document Summary

A market"s benefits can be measured by: Consumer surplus- difference between market price and what consumers would be willing to pay. Consumer surplus is the area beneath the demand curve and above the price. Producer surplus- difference between market price an the price which firms are willing to supply the product. Total producer surplus- from sales of a good at a given price is the area above the supply curve but below that price. Inverse demand function- p = 10 - . 4qd. Inverse supply function- p = 2 + . 4qs. Total surplus- the sum of the producer and consumer surpluses. When they allocate consumption of goods to buyers who most value it. Allocate sales to potential sellers who most value the right to sell the good. Well functioning markets are effective because of. Property rights- the rights of owners of valuable items, whether resources or goods, to dispose of those items as they choose.