4

This is quite fundamental, so I'd encourage you to look up your textbook as well... but here's a short explanation. Imagine that there are $n$ consumers in the market. You sort them by their willingness to pay from high to low. So the first consumer is willing to pay very high, and so on. Let's say the willingness to pay (sorted) is 12, 10, 9, 7, 5, 4, 2. ...


3

Actually, neither demand for Veblen good nor for Giffen good is strictly increasing in price. In case of Giffen good the demand actually looks as shown below in picture 1. The reason for this is that you can only increase demand for the Giffen good up until you consume your entire budget. Once the price gets higher then that you still get normal downward ...


2

Tax is payed by the party it’s levied on, but I think your question is about tax burden and loss of consumer/producer surplus. In this case both producers and consumers loose the same amount of their surplus, as you can calculate the lost area which is for both of them 40. However, in real life this does not have to be symmetric. It depends on the ...


2

First of all, there is no need to believe any economic dogma. The real world is usually more complicated than these stories. If anyone can convince me of something with a two minute anecdote, that was probably not an important aspect of my world view, and I should probably not engage in setting such policy. (E.g. via voting for the person who tells the same ...


1

Consumer surplus in Microeconomics 101 is indeed often used in the way you describe and to illustrate a point about the allocation efficiency of a free market. However, it is important to keep in mind the assumptions and limitations of the framework you describe. First, the case you describe is a partial equilibrium case. This framework does not allow for ...


1

Utility is not the same as consumer surplus. Consumer surplus is the difference between price an individuals pay and their individual reservation price. Utility is a measure of gratification that can be completely different from consumer surplus and depending on what kind of utility we are talking about it might not even be possible to assign integer value ...


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