Search results
Results from the WOW.Com Content Network
Consumer surplus can be used as a measurement of social welfare, shown by Robert Willig. [8] For a single price change, consumer surplus can provide an approximation of changes in welfare. With multiple price and/or income changes, however, consumer surplus cannot be used to approximate economic welfare because it is not single-valued anymore.
Furthermore, when utility is quasilinear, compensating variation (CV), equivalent variation (EV), and consumer surplus are algebraically equivalent. [1]: 163 In mechanism design, quasilinear utility ensures that agents can compensate each other with side payments.
Revealed preference theory, pioneered by economist Paul Anthony Samuelson in 1938, [1] [2] is a method of analyzing choices made by individuals, mostly used for comparing the influence of policies [further explanation needed] on consumer behavior.
The assumptions required are generally characterised as "very weak". [9] More specifically, the existence of competitive equilibrium implies both price-taking behaviour and complete markets , but the only additional assumption is the local non-satiation of agents' preferences – that consumers would like, at the margin, to have slightly more ...
Allocative efficiency takes into account the preferences of the consumers and the efficient allocation of resources. Graphically this point is reached when price is equal to marginal cost. At this point there is no deadweight loss, and the social surplus (consumer surplus + producer surplus) is maximized.
Consumer surplus need not exist, for example in monopolistic markets where the seller can price above the market clearing price. Alternatively, should fixed costs or economies of scale raise the marginal cost of adding more consumers higher than the marginal profit from selling more product, consumer surplus may be captured by the seller. This ...
Agricultural surplus in the dual economy of Fei and Ranis. To understand the formation of agricultural surplus, we must refer to graph (B) of the agricultural sector. The figure on the left is a reproduced version of a section of the previous graph, with certain additions to better explain the concept of agricultural surplus.
The consumer surplus gained from Product B is denoted by . Therefore, for a given amount of money, the consumer will purchase the superior variation of Product A over Product B as long as U ( d , d 1 ) − P ≥ u ∗ {\displaystyle U(d,d_{1})-P\geq u^{*}\,} , where the consumer surplus from the superior variation of Product A is greater than ...