ECO 201 Chapter Notes - Chapter 9: Economic Surplus, Market Failure, Externality
Document Summary
Relationship between price of a good or service and the quantity demanded by one person is individual demand. Consumer surplus: the excess of the benefit received from a good over the amount paid for it. Supply and cost behave in the same way as demand and benefit. Firms make a profit when they receive more from the sale than the cost of production. Price and quantity supplied for a person is individual supply and for all producers is market supply. Producer surplus: the excess of the amount received from the sale of a good or service over the cost of producing it. Total surplus: the some of producer surplus and consumer surplus. Deadweight loss: decrease in total surplus because of inefficient level of production. Externalities: a cost or benefit that affect someone else other than the buyer or seller. High transaction costs: the costs of services and goods that enable a market to bring buyers and sellers together.
