lecture3 - Consumer & Producer Surplus Welfare Analysis...

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Consumer & Producer Surplus
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Welfare Analysis Economists care about how economies are organized, and how changes to the functioning of an economy affect people . Welfare Analysis: How much better or worse off individuals or a society are as a result of some change.
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We can use Supply & Demand to conduct Welfare Analysis: How much benefit do producers and consumers receive from markets? How is the welfare of consumers and producers affected by changes in market prices ? How are these concepts related to demand and supply curve ?
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A consumer’s willingness to pay for a good is the maximum price at which he or she would buy that good. Individual Consumer Surplus: The net gain to an individual buyer from the purchase of a good. It is equal to the difference between the buyer’s willingness to pay and the price paid.
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5 A consumer’s willingness to pay for a good is the maximum price at which he or she would buy that good.
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Total Consumer Surplus Total Consumer Surplus: The sum of the individual consumer surpluses of all the buyers of a good. The term consumer surplus is often used to refer to both individual and to total consumer surplus.
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Total Consumer Surplus: Total surplus from purchases of a good at a given price is equal to the area below the demand curve but above that price.
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This note was uploaded on 10/04/2008 for the course MACROECONO 101 taught by Professor No name during the Spring '08 term at Rutgers.

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lecture3 - Consumer & Producer Surplus Welfare Analysis...

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