ECON 100B Lecture Notes - Lecture 13: Demand Curve, Fixed Cost, Economic Surplus
Document Summary
Comparative statics in competitive markets: supply and demand shifts. Mostly on quantity if supply is elastic; mostly on price if supply is inelastic supply is elastic o supply is inelastic o. Review of consumer surplus consumer surplus: monetary measure (expressed in $) of the consumer"s net benefit of bring able to purchase in this market, area under the demand curve, above price line, denoted by green o. P = 5 q / 2. Cs = (5 p*) * q* Producer surplus total profit of the firms in this market derived from supply curve ignoring fixed costs. Money is transferable, and both cs and ps are in monetary units. Welfare = total surplus = consumer surplus + producer surplus area denoted by green triangle big question: given p* and q*, how can we increase ts. Observation 1: if output were below q*, total surplus would be strictly lower. Marginal value for q" is greater than the marginal cost for q bar.
