23115 Chapter Notes - Chapter 7: Economic Surplus, Deadweight Loss
Efļ¬ciency of Markets
Consumer Surplus
Consumer Surplus = buyerās willingness to pay - amount the buyer pays for it
e.g. If i would pay $10 for a burger which costs $7, the consumer surplus is $3
Marginal Buyer: the buyer that would leave the market ļ¬rst if the price was any higher
Willingness to pay: the maximum a buyer is willing to pay for a good
Consumer Surplus Demand Curve:
Given a price, this shows the quantity the buyers are willing and able to purchase
Given a quantity, this shows the willingness to payoff the last unit of the good
Consumer Surplus measures the beneļ¬t that buyers receive from a good as the buyers perceive it
Producer Surplus
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Document Summary
Consumer surplus = buyer"s willingness to pay - amount the buyer pays for it e. g. if i would pay for a burger which costs , the consumer surplus is . Marginal buyer: the buyer that would leave the market rst if the price was any higher. Willingness to pay: the maximum a buyer is willing to pay for a good. Given a price, this shows the quantity the buyers are willing and able to purchase. Given a quantity, this shows the willingness to payoff the last unit of the good. Consumer surplus measures the bene t that buyers receive from a good as the buyers perceive it. Producer surplus = amount a seller is paid - sellers" cost. Willingness to sell: the minimum amount a seller is willing to receive for a good. Marginal seller: the seller who would leave the market rst if the price were any lower.
