08 Efficiency

08 Efficiency - Welfare Economics Welfare economics is the...

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Unformatted text preview: Welfare Economics Welfare economics is the study of how the allocation of resources affects economic well-being. ◆ Buyers and sellers receive benefits from taking part in the market. ◆ The equilibrium in a market maximizes the total welfare of buyers and sellers. Welfare Economics ◆ Consumer surplus measures economic welfare from the buyer’s side. ◆ Producer surplus measures economic welfare from the seller’s side. Consumer Surplus Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. 1968 Chevy Camaro Willingness-to-Pay for a 1968 Chevy Camaro Buyer Willingness to Pay Alan 10,000 Beth 8,000 Carl 7,000 Diane 2,000 Eduardo 1,000 Demand Schedule for a 1968 Chevy Camaro Price Buyer(s) Quantity Demanded p > 10,000-- 8,000 < p <= 10,000 A 1 7,000 < p <= 8,000 AB 2 2,000 < p <= 7,000 ABC 3 1,000 < p <= 2,000 ABCD 4 p <= 1,000 ABCDE 5...
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This note was uploaded on 04/26/2010 for the course ECON 101 taught by Professor Staff during the Spring '08 term at Vassar.

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08 Efficiency - Welfare Economics Welfare economics is the...

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