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Lectureslides7

Lectureslides7 - LECTURE 7 Consumer Surplus"CS Econ 1...

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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 ($)
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