This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: 1 Econ 1, Winter 2008 RATIKA NARAG, Ph.D. LECTURE 7 Consumer Surplus (CS) Meaning and Calculation of CS Relationship to the demand curve Producer Surplus (PS) Meaning and Calculation of PS Relationship to the supply curve Total Surplus Meaning and Calculation of total surplus Gains from trade and efficiency Deadweight Loss and Elasticity LECTURE 7 Consumer Surplus the difference between the max amount that a person is willing to pay for each unit of a good and its current market price Individual CS Net gain to an individual buyer from the purchase of the good/service Total CS Sum of individual CS of all the buyers of a good/service Area under the demand curve but above the price LECTURE 7 Remember: Market Demand is the sum of individual demand curves Marginal Willingness to Pay: Amount of money that a person is willing to pay to obtain an extra unit of a good/service LECTURE 7 Example: 4 5 5 4 6 3 7 2 8 1 Marginal willingness to pay ($) Quantity of Good X LECTURE 7 Demand Curve tells us: At any price, how much of a good/service will...
View Full Document