Chapter 7 - Consumers, Producers, and the Efficiency of Markets Flashcards Preview

EC120 - MicroEcon > Chapter 7 - Consumers, Producers, and the Efficiency of Markets > Flashcards

Flashcards in Chapter 7 - Consumers, Producers, and the Efficiency of Markets Deck (10)
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1
Q

Welfare Economics

A
  • studies how the allocation of resources affects economic well-being
2
Q

Willingness to Pay (WTP)

A
  • the max a buyer will pay for a good
3
Q

WTP Demand Curve

A
  • WTP can be put in a schedule and in curve

- the curve will be like a staircase

4
Q

Consumer Surplus (CS)

A
  • the amount a buyer is willing to pay minus the amount the buyer actually pays
  • WTP - P
5
Q

CS with a Smooth Demand Curve

A
  • calculate the area of the triangle formed above the price line
  • area = 1/2 x base x height
6
Q

Cost

A
  • the values of everything a seller must give up to produce a good
  • similar staircase curve to WTP
7
Q

PS with a Smooth Supply Curve

A
  • calculate the area of the triangle formed below the price line
  • area = 1/2 x base x height
8
Q

Producers Surplus (PS)

A
  • the amount a seller is paid for a good minus the seller’s cost
9
Q

Total Surplus

A
  • sum of CS and PS

- total gains from trade in the market

10
Q

Equilibrium and Total Surplus

A
  • maximizes total surplus