SurCalCh5Sec5 - Survey Calculus, Section 5.5 Two...

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Survey Calculus, Section 5.5 TV s01 Two Applications to Economics: Consumers’ Surplus and Income Distribution Suppose you could purchase a product for less than you were willing to pay. The “savings” between what you actually had to pay and what you were willing to pay would be a benefit to you. If we added up this difference for all of that product during a particular time period, the total savings would be called consumer’s surplus for that product. The consumers’ surplus is a measure of the benefit that consumers get from an economy where competition keeps prices low. More precise Definition of Consumers’ Surplus A demand function represents the relationship between the price of an item and the quantity sold at that price. Typically, as price rises, demand falls. In other words, there is an inverse relationship between price and quantity. The demand curve gives the price that consumers are willing to pay, and the market price is what they do pay . If the market price is below the demand curve, the consumers are getting the benefit.
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This note was uploaded on 01/12/2012 for the course MATH 2043 taught by Professor Pamelasatterfield during the Fall '05 term at NorthWest Arkansas Community College.

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SurCalCh5Sec5 - Survey Calculus, Section 5.5 Two...

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