Notes on Chapter 6 - Chapter 6 Consumer Surplus and the...

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Chapter 6 Consumer Surplus and the Demand Curve Willingness to pay and the demand curve Willingness to pay for a good is the maximum price at which he or she would buy that good. One can use the range of wllingness to pay to construct a demand schedule and from that demand schedule one can construct a demand curve Willingness to pay and consumer surplus Individual consumer surplus is the net gain a buyer achieves from the purchase of a good (ie a buyer is willing to spend 20 but only spends 10) the total consumer surplus is the net of individual surpluses The total consumer surplus generated by the purchases of a good at a given price is equal to the area below the demand curve but above the price How changing Prices Affect Consumer Surplus When the price falls total consumer surplus increases When the price of a good rises the total consumer surplus decreases Producer Surplus and the Supply Curve Cost and Producer Surplus The sellers cost
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