Econ Exam #2

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

Welfare Economics is the study of the welfare system.

The equilibrium of supply and demand in a market maximizes the total benefits received by buyers and sellers.

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Joel has a 1966 Mustang, which he sells to Susie. Susie is pleased since she paid 8,000 for it but would have been willing to pay 11,000 for the car. Susies consumer surplus is 2,000

For any given quantity, the price on a demand curve represents the marginal buyer's willingness to pay.

The area above the demand curve and below the price measures the consumer surplus in a market.

Consumer surplus measures the benefit to buyers of participating in a market.

A buyer is willing to buy a product a ta price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

In a competitive market, sales go to those producers who are willing to supply the product at the lowest price.

Producer surplus is the amount a seller is paid minus the cost of production.

Connie can clean windows at cost 1 per window. The market price for window cleaning is 3 per window. If connie cleans 100 windows, her producer surplus is 100.

At any quantity, the price given by the supply curve shows the cost of the lowest cost seller.

The area below the price and above the supply curve measures the producer surplus in a market.