cmserver-11 - Econ 1110 Introduction to Microeconomics...

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Econ 1110 Introduction to Microeconomics Professor Richard V. Burkhauser 7 Consumers, Producers, and the Efficiency of Markets
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Econ 1110 – Professor Burkhauser Key Concepts • welfare economics, p. 136 • willingness to pay, p. 136 • consumer surplus, p. 137 • cost, p. 141 • producer surplus, p. 141 • efficiency, p. 145 • equality, p. 146
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Figure 7.1 Consumer and Producer Surplus in the Market Equilibrium Producer surplus Consumer surplus Price 0 Quantity Equilibrium price Equilibrium quantity Supply Demand A C B D E
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Econ 1110 – Professor Burkhauser MARKET EFFICIENCY Three Insights Concerning Market Outcomes 1) Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay. 2) Free markets allocate the demand for goods to the sellers who can produce them at least cost. 3) Free markets produce the quantity of goods that maximizes the sum of consumer and producer surplus.
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Figure 7.2 The Efficiency of the Equilibrium Quantity Quantity Price 0 Supply Demand Cost
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This note was uploaded on 10/21/2011 for the course ECON 1110 at Cornell University (Engineering School).

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cmserver-11 - Econ 1110 Introduction to Microeconomics...

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