Econ Chapter 7
total surplus
all of the above: -is the to value to buyers minus the cost to sellers -can be used to measure a markets efficieny -is the sum of consumer and producer surplus
total surplus is represented by the area
between the demand and supply curves up to the point of equilibrium
the equilibrium allocation of resources is
efficient bc total surplus is maximized at the equilibrium
a consumers willingness to pay directly measures
how much a buyer values a good
suppose the demand for peanuts increases. what will happen to producer surplus in the market for peanuts
it increases
cost is a measure of the
sellers willingness to sell
consumer surplus is
the amount a buyer is willing to pay for a goo minus the amount the buyer actually pays for it
a supply curve can be used to measure producer surplus because it reflects
the sellers costs
efficiency in a market is achieved when
the sum of producer surplus and consumer surplus is maximized
producer surplus directly measures
the well- being of sellers
at the equilibrium price of a good, the good will be purchased by those buyers who
value the good more than price
economists typically measure efficiency using
total surplus
in a market, the marginal buyer is the buyer
who would be the first to leave the market if the price were any higher
on a graph, the area below a demand curve and above the price measures
consumer surplus
total surplus in a market is equal to
consumer surplus + producer surplus
all else equal, what happens to consumer surplus if the price of a good increases
consumer surplus decreases
suppose there is an early freeze in cali that reduces the size of the lemon crop. what happens to consumer surplus in the market for lemons
consumer surplus decreases
a seller is willing to sell a product only if the seller receives a price that is at least as great as the
sellers cost of production
if the price a consumer pays for a product is equal to a consumers willignness to pay, the the consumer surplus relevant to that purchase is
zero