Unformatted text preview: e may have little relationship. -- Suppose you have a treasure chest with $10 -million in it and you know you must get it open quickly or you lose the money. How much would you be willing to pay for a $5 tool to let you break the chest open? break The difference in value to a user and price paid in The exchange is consumers’ surplus. exchange Consumer surplus Consumer The gains from trade going to consumers:
Price A P* B Demand 0 Q* Quantity Total use value (ABQ*0) minus Total expenditures (P*BQ*0) equals Consumer surplus (ABP*) The producers’ perspective The
Look at supply side of market and ask: What is the total cost to producers of the quantity Q*?” of Three equal de...
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