Class Notes - 10-29-07

Class Notes - 10-29-07 - Microeconomics Class Notes...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Microeconomics – Class Notes – 10/29/07 E. Efficient Market Outcome will maximize Total Surplus (T.S = C.S + P.S) 1. At Equilibrium – The market is efficient a. Any other outcome besides Q(0) will yield less surplus to society PROVING WHY CERTAIN POINTS ARE INEFFICIENT 2. Example: Quantity in market is below equilibrium (see graphs in binder) a. At Q(l), there is a wedge Q(l) is inefficient because this point is associated with lost surplus b. Q(l) is inefficient because the marginal benefit of consumption > M.C at Q(l) c. Example: Quantity in market is greater than equilibrium i. Q(h) is inefficient because it is associated with negative surplus ii. M.C > P, and P > M.B, thus [ M.C > M.B ] at Q(h) Thus, Q(h) cannot be efficient II. Measure Inefficiency A. Dead weight loss (DWL) a. Lost or negative surplus that is considered the inefficiency b. The loss in consumer and producer surplus from an inefficient outcome c. Find the DWL between the efficient outcome (level of production) and the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/15/2008 for the course ECON 100 taught by Professor Stephaniemartin during the Fall '07 term at Allegheny.

Page1 / 2

Class Notes - 10-29-07 - Microeconomics Class Notes...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online