Chapter7 - Chapter 7: Consumers, Producers, and The...

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Chapter 7: Consumers, Producers, and The Efficiency of Markets - Welfare economics: the study of how the allocation of resources affects economic well- being Consumer Surplus 1. Willingness to Pay: the maximum amount that a buyer will pay for a good a. Shows how much the buyer values the good b. Consumer Surplus: the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it b.i. EX) Willing to pay $100 for an album and pays $80, consumer surplus= $20 2. Using the Demand Curve to Measure Consumer Surplus a. Marginal buyer: the buyer who would leave the market first if the price were any higher than their willingness to pay b. The area below the demand curve and above the price measures the consumer surplus in a market 3. How a Lower Price Raises Consumer Surplus a. Consumer surplus on a graph is shown by a triangle that ends at the quantity demanded to the price given at that quantity b. When price falls and quantity increases, consumer surplus increases
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Chapter7 - Chapter 7: Consumers, Producers, and The...

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