week4_notes - Benefits to Market Participants Measures of...

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Benefits to Market Participants • Measures of economic well-being or welfare: Consumer Surplus and Producer Surplus • Markets and voluntary exchange are efficient ways to organize production and allocate resources
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Horizontal and Vertical Interpretation of Demand Curves •H o r i z o n t a l How much consumers wish to purchase at various prices •V e r t i c a l Shows the willingness to pay at various quantities The height shows the value (MB) of the good Quantity Price D $5 $3 2 3
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Consumer Surplus Consumer Surplus Price Quantity, thousands per week D (MB) $3 Q* Total Benefit Revenue ($3 Q*) Consumer Surplus $6 Consumer Surplus = ½ Q* $3
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Interpretation of Supply Curves •H o r i z o n t a l How much producers wish to sell at various prices •V e r t i c a l Shows the smallest amount a seller would be willing to accept for the good. The height is the opportunity cost (MC) of supplying the
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This note was uploaded on 04/29/2008 for the course ECON 0100 taught by Professor Kenkel during the Spring '08 term at Pittsburgh.

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week4_notes - Benefits to Market Participants Measures of...

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