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An extensive introduction of demand and supply and discuss demand and supply in relation to cost...

An extensive introduction of demand and supply and discuss demand and supply in relation to cost and benefit and define consumer and producer surplus and the affects. Define elasticity.
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Answer #1

Demand curve gives the combination of quantity and price, or value of the good to consumer. This is the total benefit. The value of one more unit of good on the demand curve gives marginal benefit from the good.

Similarly supply curve tells the price willingness to recieve of seller and how much they willing to sell. It reflects the marginal cost of output. How much an additional unit of output cost to sellers is inferred from supply curve.

Consumer surplus is the difference between total amount consumer is willing to pay and price they are actually paying.

Producer surplus is the difference between price they are actually getting and price at which they are ready to supply.

Elasticity is the responsiveness of percentage change in quantity due to percentage change in price.

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