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The consumer's surplus is highest at the largest number of units for which, even for the last unit, the maximum willingness to pay is not below the market price. 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.
The Ramsey problem, or Ramsey pricing, or Ramsey–Boiteux pricing, is a second-best policy problem concerning what prices a public monopoly should charge for the various products it sells in order to maximize social welfare (the sum of producer and consumer surplus) while earning enough revenue to cover its fixed costs.
A state diagram for a simple example is shown in the figure on the right, using a directed graph to picture the state transitions. The states represent whether a hypothetical stock market is exhibiting a bull market, bear market, or stagnant market trend during a given week. According to the figure, a bull week is followed by another bull week ...
Graph homomorphism problem [3]: GT52 Graph partition into subgraphs of specific types (triangles, isomorphic subgraphs, Hamiltonian subgraphs, forests, perfect matchings) are known NP-complete. Partition into cliques is the same problem as coloring the complement of the given graph. A related problem is to find a partition that is optimal terms ...
In economics, an excess supply, economic surplus [1] market surplus or briefly supply is a situation in which the quantity of a good or service supplied is more than the quantity demanded, [2] and the price is above the equilibrium level determined by supply and demand. That is, the quantity of the product that producers wish to sell exceeds ...
A housing surplus that still prices out many But the new finding about overall housing supply levels, which Schwartz says was a surprise, offers some nuance to one of the major problems in the ...
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.
Under the standard assumption of neoclassical economics that goods and services are continuously divisible, the marginal rates of substitution will be the same regardless of the direction of exchange, and will correspond to the slope of an indifference curve (more precisely, to the slope multiplied by −1) passing through the consumption bundle in question, at that point: mathematically, it ...