econ ch 6 outline - Kristin Chen Econ Ch 6-Individuals...

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Kristin Chen 1. a. Willingness to pay =maximum price at which someone will buy a good i. Demand curve is determined by the willingness to pay of each potential consumer ii. Demand curve is step-shaped when there is a small # of consumers b. Individual consumer surplus = willingness to pay – price paid i. Net gain to an individual consumer gets from the purchase of a good c. Total consumer surplus = the sum of the individual consumer surpluses of all the buyers of a good i. Area between the demand curve and the price d. Consumer surplus = refers to both individual and consumer surplus 2. How changing prices affect consumer surplus a. When the price of a good falls, total consumer surplus increases i. b. When the price of a good rises, total consumer surplus decreases 3. Producer Surplus & the Supply Curve a. Potential seller’s cost =lowest price at which the seller is willing to sell a good i. Determines supply curve for a good b. Individual producer surplus = net gain to a seller from selling a good i. = price received – seller’s cost c. Total producer surplus = sum of the individual producer surpluses of all the sellers of a good
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This note was uploaded on 02/13/2008 for the course ECON 1110 taught by Professor Wissink during the Fall '06 term at Cornell University (Engineering School).

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econ ch 6 outline - Kristin Chen Econ Ch 6-Individuals...

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