Economics Study Guide For Test 2-Elastic demand, sellers pay more of tax-Inelastic demand, buyers pay more of tax-Demand : highest price you are willing and able to pay for a quantity of goods-Supply : the minimum price that a firm is willing to accept to produce a good-Welfare Economics : how the allocation of resources affects economic wellbeing-CS : amount buyer is willing to pay minus amount buyer actually pays-PS : amount seller is paid minus seller’s cost of providing good-Total Surplus : value to buyers minus cost to sellers-The value of CS for the marginal buyer is 0; leave market if the price were any higher-Cost to seller includes the opportunity cost of the seller’s time-The height of the supply curve is the marginal seller’s cost-Free markets allocate output to buyers who have a willingness to pay above the price-If a social planner chooses to produce less than the equilibrium quantity of a good, then the vale placed on the last unit of production by buyers exceeds the cost of production
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This note was uploaded on 08/27/2008 for the course ECON 200 taught by Professor Levendis during the Fall '07 term at Loyola New Orleans.