Chapter+7+Answer+KELJ

ANSWER: 1. According to Adam Smith's invisible hand, people naturally guide themselves to get the best outcome by judging the standard of economic efficiency. 2.  → Consumer surplus= Value to buyers – Amount paid by buyers

 → Producer surplus= Amount received by sellers – Cost to sellers

 →Total surplus= Consumer surplus+ Producer Surplus →Total surplus= Value to buyers – Amount paid by buyers+ Amount received by sellers – Cost to sellers -Amount paid by buyers = Amount received by sellers

__So, Total surplus= Value to buyers – Cost to sellers__
3. Buyers who value the goods most highly 4. Sellers who can produce the goods at least cost. 5. Equilibrium point.