Price Controls cause Inefficiency Consumer surplus Producer surplus Total surplus Deadweight loss
Price Controls cause Inefficiency ◼ Consumer surplus ◼ Producer surplus ◼ Total surplus ◼ Deadweight loss
Recall: Demand--the definition a The quantity of a good or service consumers are willing and able to buy at various prices a The maximum price the consumer is willing and able to pay for the next unit of the good or service
Recall: Demand--the definition ◼ The quantity of a good or service consumers’ are willing and able to buy at various prices ◼ The maximum price the consumer is willing and able to pay for the next unit of the good or service
Two Different Prices The maximum price the consumers are willing to pay for Vs The market price the consumers actually paid for
Two Different Prices The maximum price the consumers are willing to pay for Vs. The market price the consumers actually paid for
Consumer Surplus Individual consumer surplus the net gain to an individual buyer from the purchase of a good equal to the difference between the buyers willingness to pay and the price paid
Consumer Surplus ◼ Individual consumer surplus – the net gain to an individual buyer from the purchase of a good. – equal to the difference between the buyer’s willingness to pay and the price paid