Lec10 - Consumer Surplus u consumer surplus u difference...

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1 u consumer surplus u difference between price willing to pay and market price Consumer Surplus Quantity Price (per unit) S D Q E P E E Consumer Surplus u change in consumer surplus u change in market price u loss due to D P u loss due to D Q P E ´ Q E ´ E ´ Loss due to higher price Loss due to lower consumption New Consumer Surplus Quantity Price (per unit) S D Q E P E E Producer Surplus u change in producer surplus u change in market price u loss due to D P u producer surplus u difference between market price and price required to supply unit Q E ´ E ´ Producer Surplus P E ´ New Producer Surplus Loss due to lower price Loss due to lower production u loss due to D Q Consumer Surplus Quantity Price (per unit) S D Q E P E E Consumer and Producer Surplus u measure how well market system works u measure gains from change in market u measure benefits of government policies Producer Surplus - tax
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