surpluses - the value of everything a seller must give up...

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Microeconomics Consumer and Producer Surplus Willingness to Pay (WTP): maximum amount that a buyer will pay for a good. could be higher than the actual selling price measures how much the buyer values the good The demand curve is a staircase shape, one step per buyer. In a huge number of buyers (perfectly competitive market), the curve appears to straighten out. At any quantity, the height of the demand curve is the WTP of a marginal buyer (a buyer who would leave if price were any higher) Consumer Surplus the amount a buyer is willing to pay, but doesn’t have to, or one could say the personal satisfaction one receives from a transaction. Consumer Surplus= WTP-Price Total Consumer Surplus is the area under the demand curve above the price. Cost:
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Unformatted text preview: the value of everything a seller must give up to produce a good o resources o time A seller will produce goods and services ONLY if the price exceeds his cost The height of the supply curve is the cost of the marginal seller (the seller who would leave the market if the price were any higher) Producer Surplus • the difference between the selling price of a good and the cost of the good to the supplier Total producer surplus is the area under the price and above the supply curve Total Surplus Consumer Surplus + Producer Surplus OR TS= value to buyers-cost to sellers • Total Surplus is maximized at equilibrium. • This is the most efficient allocation of price, and generally is equally agreeable to both producer/consumer....
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This note was uploaded on 10/05/2011 for the course ECON 2023 taught by Professor Unknown during the Spring '05 term at Arkansas.

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