ECO 05 - 6 OCT - Lecture 05 6 October 2008 ECO 100Y5Y A...

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Unformatted text preview: Lecture 05 6 October 2008 ECO 100Y5Y A. Cohen 1 E C O N O M I C S PARKIN BADE Lecture 05 6 October 2008 E C O N O M I C S PARKIN BADE Chapter 5 Efficiency & Equity MB and MC Refresher ♦ Marginal Benefit ( MB ) • benefit from consuming 1 more unit • maximum amount consumer willing to pay for 1 more unit • read MB curve by starting with quantity and going “up” and “over” • decreasing marginal benefit continued Lecture 05 6 October 2008 ECO 100Y5Y A. Cohen 2 ♦ Marginal Cost ( MC ) • opportunity cost of producing 1 more unit • minimum amount producers must receive to produce 1 more unit • read MC curve by starting with quantity and going “up” and “over” • increasing marginal cost continued Demand and Marginal Benefit ♦ Value is what consumers willing to pay ♦ Price is what consumers actually pay ♦ Demand curve is a MB curve • MB = value = maximum willing to pay ♦ Consumer surplus = • value of good – price • triangular area under demand curve but above market price Total benefit Amount paid Consumer surplus Q 0 10 20 30 40 0.50 1.00 1.50 2.00 2.50 P D = MB Lisa’s consumer surplus from 10th pizza Market price Fig. 5.2a Demand & Consumer Surplus Lecture 05 6 October 2008 ECO 100Y5Y A. Cohen 3 Supply and Marginal Cost ♦ Opportunity cost is what producers pay ♦ Price is what producers receive ♦ Supply curve is a...
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This note was uploaded on 04/25/2010 for the course ECONOMICS ECO100Y taught by Professor Furlong during the Fall '09 term at University of Toronto.

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ECO 05 - 6 OCT - Lecture 05 6 October 2008 ECO 100Y5Y A...

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