consumer and producer surplus Flashcards
what is benefit
the most people are willing to pay
most youre willing to pay the second time is additional benefit
what is demand curve = to
marginal benefit curve
marginal meaning
additional
what does marginal benefit curve show
the most people are willing to pay for a quantity of a good= the marginal benefit received from that good
as quantity increases?
marginal benefit decreases
less marginal benefit?
the price we are willing to pay also falls, the marginal benefit received each time just goes lower
law of diminishing marginal utility?
the decrease in additional benefit
when you consume more of a good , the marginal utility you get from an extra unit decreases
total utility
total benefit from all consumption
diminshing marginal utiltiy
Diminishing marginal utility
As you consume more of a good, the marginal utility from each extra unit will decrease.
E.g. as you eat more cupcakes, the marginal benefit of the next cupcake goes down each time as you become less hungry
marginal utility
additional benefit received from consuming an extra unit of a good
consumer surplus
how much benefit consumers get
difference between what consumers are willing to pay and what they actually pay
what theyre willing to pay is shown by demand curve
what they actually pay is shown by equilibrium price
supply curve=
marginal cost curve
supply curve shows lowest price producers are willing to sell for
to produce more- he only willing to accept more money
marginal cost
lowest someone is willing to supply a good for
as it shows the cost of having to produce each extra unit
producer surplus
how much benefit producers get
difference between what producers sell and what they are actually willing to sell for
demand changes on graph
increase in demand will mean bottom half triangle gets larger, producers gain more benefit as consumers are willing to pay more (outward shift in demand curve)
decrease in demand, bottom half of triangle gets smaller, equilibrium price and quantity decreases, less benefit as consumers paying less (inward shift in demand curve)
