Consider the Following Two Equations

question 203

Essay

Consider the following two equations:
1) Total surplus = Consumer surplus + Producer surplus
2) Total surplus = Value to buyers - Cost to sellers
Show how equation (1) can be used to derive equation (2).

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Definitions:

Balance Sheet

A financial overview capturing a company’s holdings, liabilities, and the proportion of equity owned by shareholders, pegged at a specific date.

Deduction

An amount that is subtracted from gross income or total expenses, used to reduce taxable income or the amount owed.

Effective Interest Rate Method

The method of amortizing discounts and premiums that provides for a constant rate of interest on the carrying amount of the bonds at the beginning of each period; often called simply the “interest method.”

Constant Dollar

A term used in economics to describe a monetary value that has been adjusted for inflation, thereby facilitating comparison of purchasing power over different periods.