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Lecture 8 slides notes

Lecture 8 slides notes - Lecture 08 EC1000 6 October 2009 A...

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Lecture 08 6 October 2009 EC1000 A. Cohen 1 E C O N O M I C S PARKIN BADE Lecture 8 6 October 2009 E C O N O M I C S PARKIN BADE Chapter 5 Efficiency & Equity MB and MC Refresher Marginal Benefit ( MB ) benefit from consuming 1 more unit maximum amount consumer willing to pay for 1 more unit read MB curve by starting with quantity and going “up” and “over” decreasing marginal benefit continued
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Lecture 08 6 October 2009 EC1000 A. Cohen 2 Marginal Cost ( MC ) opportunity cost of producing 1 more unit minimum amount producers must receive to produce 1 more unit read MC curve by starting with quantity and going “up” and “over” increasing marginal cost continued Demand and Marginal Benefit Value is what consumers willing to pay Price is what consumers actually pay Demand curve is a MB curve MB = value = maximum willing to pay Consumer surplus = value of good – price triangular area under demand curve but above market price Amount paid Consumer surplus 0 10 20 30 40 0.50 1.00 1.50 2.00 2.50 D = MB Lisa’s consumer surplus from 10th pizza Market price Fig. 5.2a Demand & Consumer Surplus
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Lecture 08 6 October 2009 EC1000 A. Cohen 3 Supply and Marginal Cost Opportunity cost is what producers pay Price is what producers receive Supply curve is a MC curve MC = minimum producers must receive to be willing to supply
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