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Consumer Surplus
-Difference between maximum amounts a consumer is wishing to pay for a good and amount actually paid.
The stepladder demand curve is converted into a straight line demand curve by making the units of good smaller. Combining consumer surplus with aggregate profits which producers obtain we can evaluate:
1) Benefits and Costs of different market structures
2) Public policies which changes the behavior of consumers and firms
distinguish between Isocost and Isocline
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Allocation Function The shifting or reallocation of production property into or out of markets based on shifts in prices for the products or services produced in that market.
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