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Unformatted text preview: a market Buyers 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