CHAPTER8

Consumer and Producer Surplus

In This Chapter

  • Consumer surplus: the benefits of being in the market
  • Deriving the demand curve using consumer surplus
  • Producer surplus and the gains from trade
  • Deriving the supply curve using producer surplus
  • How price controls, sales taxes, and deadweight loss reduce society’s welfare

Imagine a new game show called Name Your Price. The show’s host stands between two tables at which contestants are seated. On one side are three buyers; on the other side are three sellers. The host shows a picture of a beautiful red convertible Mustang. The buyers are told to type into their computer what price they are ...

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