Unformatted text preview: a market • Buyer’s Consumer Surplus = Willingness to Pay – Market Price • Total Area below demand curve and above the price is sum of the consumer surplus of all buyers in market for good and services, like laundry. How a Lower Prices Raises Consumer Surplus • Consumer Surplus = Area Above Price + Below Demand Curve • Increase in consumer surplus: 1. Buyers who were already buying Q1 at a price of P1 how pay less 2. New buyers enter market because willing to buy at a lower price What Does consumer Surplus Measure? • Measures the benefits that buyers receive from good as the buyers perceive it • Consumer surplus is good measure of economic well-being if policy makers want to respect the preferences of buyers Producer Surplus Cost and the Willingness to Sell • Cost: The value of everything a seller must give up to produce a good •...
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- Fall '08