Acceptable logotypeECO 2030. Principles of Economics-Price Theory

Market Efficiency

Consumer Surplus

  1. Willingness to pay (WTP)
  2. Consumer surplus (CS = WTP - P*)
  3. Price change and consumer surplus
  4. Welfare economics

Producer Surplus

  1. Willingness to sell/accept (WTA)
  2. Producer surplus (CS = P* - WTA)
  3. Price change and consumer surplus
  4. Welfare economics

Market Efficiency

  1. Total surplus (TS = CS + PS = WTP - WTA)
  2. Free markets maximize TS
  3. Equity

Price Controls

  1. Price ceiling (e.g., gasoline)
  2. Price floor (e.g., minimum wage)