Econ1-Fall2010-07A-Efficiency-handout - Readings Economics1

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Economics 1 rinciples of Microeconomics Principles of Microeconomics 7. Efficiency & Exchange (A) Fall 2010 Herb Newhouse 1 eadings Readings h 6: fficiency and Exchange 75 79) Ch. 6: Efficiency and Exchange (p. 175 179) Market Equilibrium and Efficiency 2 utline Outline onsumer & Producer Surplus Review Consumer & Producer Surplus Review. Efficiency. The efficiency of the competitive market equilibrium. 3 onsumer and Producer Surplus Consumer and Producer Surplus To understand efficiency, it’s useful to first y, understand consumer surplus and producer surplus. Consumer surplus : the difference between the amount that consumers value a good or service and the amount they pay for that good or service. Producer surplus: the difference between the p amount that producers are paid for a good or service and the amount the good or service costs em them. 4
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onsumer Surplus Consumer Surplus P P* D Q 5 roducer Surplus Producer Surplus P S P* Q 6 Consumer and Producer Surplus in Equilibrium P S
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This note was uploaded on 06/12/2011 for the course CS 1 taught by Professor Staff during the Fall '08 term at Cornell.

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Econ1-Fall2010-07A-Efficiency-handout - Readings Economics1

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