Topic 5 and 6: Measuring Benefits

Question 1

Marginal benefit

Answer 1

Additional benefit from consuming a small additional amt of good

Falls as quantity of good consumed increases

Question 2

MB curve

Answer 2

=the demand curve

The level of consumption for a given price

Shows the benefits that people gain from consuming Q

Shows level of Q people will choose at P

Question 3

Consumer surplus

Answer 3

The area:

Below the demand curve

Above price line

Up to quantity consumed

Question 4

Price elasticity of demand

Answer 4

= (% change in quantity demanded)/ (%change in price)

A measure of responsiveness to price

Question 5

Producers equivalent to measuring goods

Answer 5

Marginal cost instead of marginal benefits

Supply curve instead of demand curve

Producer surplus instead of consumer surplus

Question 6

Marginal cost

Answer 6

Cost of providing of a small additional amount of good

Increases as quantity of good produced increases

Question 7

MC

Answer 7

MC=P -> level of production producers would choose given P

Corresponds to supply curve = level of production for given price

Question 8

Producer surplus

Answer 8

Benefit to producers that is surplus to cost they have to pay

= area below price line; above supply line; up to quantity produced

~profit

Question 9

Price elasticity of supply

Answer 9

= (%change in quantity supplied)/ (%change in price)

Measure of responsiveness to price