Page 139 - The Principle of Economics
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CONSUMERS, PRODUCERS, AND THE EFFICIENCY
OF MARKETS
When consumers go to grocery stores to buy their turkeys for Thanksgiving din- ner, they may be disappointed that the price of turkey is as high as it is. At the same time, when farmers bring to market the turkeys they have raised, they wish the price of turkey were even higher. These views are not surprising: Buyers al- ways want to pay less, and sellers always want to get paid more. But is there a “right price” for turkey from the standpoint of society as a whole?
In previous chapters we saw how, in market economies, the forces of supply and demand determine the prices of goods and services and the quantities sold. So far, however, we have described the way markets allocate scarce resources without directly addressing the question of whether these market allocations are desirable. In other words, our analysis has been positive (what is) rather than normative (what
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IN THIS CHAPTER YOU WILL . . .
Examine the link between buyers’ willingness to pay for a good and the demand curve
Learn how to define and measure consumer surplus
Examine the link
between sellers’ costs of producing a good and the supply curve
Learn how to define and measure producer surplus
See that the equilibrium of supply and demand maximizes total surplus in a market
