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Unformatted text preview: consumer equilibrium has been reached. People should engage in economic activities until marginal benefit equals marginal cost Consumer surplus- the number of dollars by which total willingness to pay exceeds the total amount actually paid. Graphically, consumer surplus is the area between the demand curve and the horizontal line that represents price. The utility-maximizing consumer will be in equilibrium when he spends all of the available money and chooses the combination of goods that give the same marginal utility per dollar spent, for every good. Diamond-Water Paradox- why diamonds could be sold for prices that were so much higher than the price of water, even though we need water to live. Water has a small marginal utility and diamonds have a great marginal value....
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This note was uploaded on 12/04/2011 for the course EC 201 taught by Professor Haider during the Fall '10 term at Michigan State University.
- Fall '10