3.29.10 – Lecture Notes, Econ 201

3.29.10 – Lecture Notes, Econ 201 - 3.29.10...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
3.29.10 – Lecture Notes, Econ 201 EFFICIENCY OF MARKETS: ECONOMIC WELFARE ANALYSIS ANALYSIS OF COMPETITVE MARKETS: - In this session, we examine the economic welfare implications of competitive and monopolistic markets - The approach taken here (and not the only one possible), is to use the devices of Producer Surplus and Consumer Surplus - The economic welfare form the production and consumption of particular amount of a good is . ... ANGEL! Consumer Surplus + Producer Surplus = Total Surplus OPTIMALITY OF COMPETITIVE MARKETS The principal claim is that economic welfare (the sum of producer and consumer surplus) is maximized at the competitive price and quantity for a good. CONSUMER SURPLUS (Demand) - Definition: A consumer’s willingness to pay minus the amount actually paid. - When PRICE GOES DOWN, CONSUMER SURPLUS GOES UP! - Demand curve is a picture of people’s willingness to pay - What Q* is sold, willingness to pay is the shaded area (see notes) WHAT HAPPENS TO SONSUMER SURPLUS WHEN THE PRICE FALLS? -
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/13/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.

Page1 / 2

3.29.10 – Lecture Notes, Econ 201 - 3.29.10...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online