Module 6.2 Consumer Surplus Lecture

What do demand curves indicate?

Willingness to pay for marginal benefit.

What do supply curves indicate?

Willingness to accept for marginal cost.

What is market equilibrium?

The price and quantity where there is no tendency to change; where marginal benefit equals marginal cost.

What happens if the price is greater than equilibrium?

There’s a surplus leading to price decrease.

What happens if the price is less than equilibrium?

There’s a shortage leading to price increase.

When are there gains from trade?

When marginal benefit is greater than marginal cost.

How is consumer surplus calculated?

Consumer surplus is the difference between willingness to pay and actual price paid.

If a consumer is willing to pay $7 for a taco and pays $3, what is their consumer surplus?

$4.

What is the formula for Total Consumer Surplus?

Total Consumer Surplus = 1/2 * base * height.

In the context of consumer surplus, what is the base when calculating with 100 tacos sold and a price of $3?

Total quantity sold (100 tacos).

What does a higher equilibrium price result in regarding consumer surplus?

Lower consumer surplus.

What is an example that illustrates the concept of consumer surplus?

The diamond-water paradox.

What importance does marginal thinking have in economics?

It enhances personal satisfaction and economic efficiency by understanding individual decisions based on marginal benefit.