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Pastimes : Austrian Economics, a lens on everyday reality
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To: gpowell who wrote (289)11/15/2003 2:18:55 AM
From: gpowell  Read Replies (1) of 445
 
A further comment.

Consider the price paid for a DVD of the movie Groundhog Day in an auction market with an infinite number of interested participants and an infinitely divisible exchange medium.

It is almost certain that the winner will be indifferent to the win, or within a close approximation. Thus, the price paid is actionable and yet the economic agent is close to indifferent between the two states.

We call the price paid in this situation as the reservation price of the economic agent and define consumer surplus as the difference between the reservation price and the price that matches total demand to total supply.
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