Econ Chapter 7
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The study of how allocation of resources affects economic well being of the economy
Consumers willingness to pay directly measures
- How much a buyer values a good
buyer's willingness to pay - actual amount paid by buyer
Consumer Surplus Area
- The area below the demand curve and above the price
If price of good falls (if all things being equal)
- Consumer surplus increases.
A supply curve can be used to measure
- producer's surplus because it reflects the sellers cost
The amount a seller is paid for a good minus the seller's cost of providing it
Producer's Surplus Area
- The area below the price above the supply curve
- Consumer Surplus + Producer Surplus
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