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Aconsumer’swillingnesstopayforagoodisthemaximumpriceatwhichheorshewouldbuythatgood. Individualconsumersurplusisthenetgaintoanindividualbuyerfromthepurchaseofagood.Itisequaltothedifferencebetweenthebuyer’swillingnesstopayandthepricepaid.WillingnesstoPayandConsumerSurplusConsumerSurplusintheUsedTextbookMarketConsumerSurplusintheUsedTextbookMarketConsumerSurplusAfallinthepriceofagoodincreasesconsumersurplusthroughtwochannels: Againtoconsumerswhowouldhaveboughtattheoriginalpriceand Againtoconsumerswhoarepersuadedtobuybythelowerprice.ConsumerSurplusandaFallinthePriceofUsedTextbooksAFallintheMarketPriceIncreasesConsumerSurplusProducerSurplusandtheSupplyCurveButareweaswelloffaswecouldbe?Thisbringsustothequestionoftheefficiencyofmarkets. Thewillingnesstopayofeachindividualconsumerdeterminesthedemandcurve. It’simportanttorealizethatalthoughthemarketequilibriummaximizesthetotalsurplus,thisdoesnotmeanthatitisthebestoutcomeforeveryindividualconsumerandproducer. Intheend,well-functioningmarketsowetheireffectivenesstotwopowerfulfeatures:propertyrightsandtheroleofpricesaseconomicsignals. Thetotalproducersurplusfromsalesofagoodatagivenpriceistheareaabovethesupplycurvebutbelowthatprice. ConsumerSurplusandtheDemandCurve ©2009WorthPublishers attemptstocapturemoreresourcesthatproduceinefficiencies, Itensuresthateverypotentialbuyerwhodoesn’tmakeapurchasevaluesthegoodlessthaneverypotentialsellerwhodoesn’tmakeasale,sothatnomutuallybeneficialtransactionsaremissed. Theconceptsofconsumersurplusandproducersurpluscanhelpusunderstandwhymarketsareaneffectivewaytoorganizeeconomicactivity. Quantityofcomputers Thetotalconsumersurplusgeneratedbypurchasesofagoodatagivenpriceisequaltotheareabelowthedemandcurvebutabovethatprice. Economistshavewrittenvolumesaboutwhymarketsareaneffectivewaytoorganizeaneconomy. Quantityofbooks Bycomparingthetotalsurplusgeneratedbytheconsumptionandproductionchoicesinthemarketequilibriumtothesurplusgeneratedbyadifferentsetofproductionandconsumptionchoices,wecanshowthatany