chapter 6.docx - 1.Explain how buyers willingness to pay...

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1.Explain how buyers’ willingness to pay, consumer surplus and the demand curve are related. Buyer’s willingness to pay is the maximum amount that a buyer will pay for a good and it measures how much that buyer values that good.The buyers will refuse to buy the good at a price more than his willingness to Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.It measures the buyer’s benefit of participating in a market. Consumer surplus is closely related to the demand curve for a product. For example, if the price is above $ 100, the quantity demanded is 0, because no buyer is willing to pay that much .At any quantity, the price given by the demand curve shows the willingness to pay of the marginal buyer, the buyer would leave the market first if the price were any higher.Due to the demand curve reflects buyers’ willingness to pay, it can also use it to measure consumer surplus.The consumer surplus in a market is the area below the demand curve and above the price.The total area below the demand
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