SC ECON 221 - Supply and Demand (part 2) (3 pages)

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Supply and Demand (part 2)

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Supply and Demand (part 2)


This lecture covers the definition of efficiency and willingness to pay regarding consumers. This lecture also covers the concepts of consumer surplus and producer surplus.

Lecture number:
Lecture Note
University Of South Carolina-Columbia
Econ 221 - Prin of Microeconomics

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ECON 221 Lecture 6 Outline of Last Lecture I Supply Curves II Demand Curves III Curve Shifts Outline of Current Lecture I Efficiency II Willingness to Pay III Consumer Surplus IV Producer Surplus Current Lecture I II III IV V Competitive markets lead to good outcomes A Lots of buyers B Lots of sellers C Selling the exact same item must accept the price in the market Analyze impact of government intervention in markets A What happens to price and quantities B Who benefits and who suffers Good outcome market equilibrium is EFFICIENT A No missed opportunity to make someone better off Example A I have 2 chocolate bars to give away B Ann loves chocolate Bob is allergic C Giving one to Ann and one to Bob is not efficient giving both to Ann would be the most efficient choice D Efficiency does not always equal fairness Example A I have 4 apples Ann and Bob both like apples unused apples go bad and aren t eaten by anyone B Which of the following outcomes are efficient 1 Give both 2 apples 2 Give Ann 3 apples and Bob 1 These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute VI VII VIII IX X XI XII XIII XIV XV XVI XVII XVIII XIX XX XXI 3 Give Bob 4 apples and Ann none 4 Give Ann 3 apples In markets prices adjust until we reach equilibrium everyone who wants to buy is able to and everyone who wants to sell is able to A No missed sales opportunities and no wasted production Equilibrium outcome Nobody wants to change what they are doing given what everyone else is doing A Has to do with the choices individuals are making Efficient outcome there is no way to make anyone better off Ways to measure hoe much people are benefiting from participating in markets A Consumer surplus CS B Producer surplus PS C Total surplus CS PS Show competitive market equilibrium max s total surplus Willingness to pay A Willingness to pay is a measure of how beneficial one thinks something is B WTP is built

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