Transcript Document

Consumers,
Producers, and the
Efficiency of Markets
Copyright © 2011 Cengage Learning
7
Table 1 Four Possible Buyers’ Willingness to Pay
Copyright © 2011 Cengage Learning
Figure 1 The Demand Schedule and the Demand Curve (1)
Copyright © 2011
Cengage
Learning
Copyright
© 2010
Cengage Learning
Figure 1 The Demand Schedule and the Demand Curve (2)
Price of
album
€100
Liam’s willingness to pay
Paul’s willingness to pay
80
Noel ’s willingness to pay
70
Tony ’s willingness to pay
50
Demand
0
1
2
3
4
Quantity of
albums
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Figure 2 Measuring Consumer Surplus with the Demand
Curve (1)
(a) Price = €80
Price of
album
€100
Liam’s consumer surplus (€20)
80
70
50
Demand
0
1
2
3
4
Quantity of
albums
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Figure 2 Measuring Consumer Surplus with the Demand
Curve (2)
(b) Price = €70
Price of
album
€100
Liam’s consumer surplus (€30)
80
Paul’s consumer
surplus (€10)
70
50
Total
consumer
surplus (€40)
Demand
0
1
2
3
4 Quantity of
albums
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Figure 3 How the Price Affects Consumer Surplus (1)
(a) Consumer surplus at price P
Price
A
Consumer
surplus
P1
B
C
Demand
0
Q1
Quantity
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Figure 3 How the Price Affects Consumer Surplus (2)
(b) Consumer surplus at price P
Price
A
Initial
consumer
surplus
P1
P2
0
C
B
Consumer surplus
to new consumers
F
D
E
Additional consumer
surplus to initial
consumers
Q1
Demand
Q2
Quantity
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Table 2 The Costs of Four Possible Sellers
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Figure 4 The Supply Schedule and the Supply Curve (1)
Copyright © 2011
Cengage
Learning
Copyright
© 2010
Cengage Learning
Figure 4 The Supply Schedule and the Supply Curve (2)
Copyright © 2011 Cengage Learning
Figure 5 Measuring Producer Surplus with the Supply
Curve (1)
(a) Price = €600
Price of
house
painting
Supply
€900
800
600
500
Nana’s producer
’
surplus (€100)
0
1
2
3
4
Quantity of
houses painted
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Figure 5 Measuring Producer Surplus with the Supply
Curve (2)
(b) Price = €800
Price of
house
painting
€900
Supply
Total
producer
surplus (€500)
800
600
Georgia’s producer
surplus (€200)
500
Nana’s producer
’
surplus (€300)
0
1
2
3
4
Quantity of
houses painted
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Figure 6 How the Price Affects Producer Surplus (1)
(a) Producer surplus at price P
Price
Supply
P1
B
Producer
surplus
C
A
0
Q1
Quantity
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Figure 6 How the Price Affects Producer Surplus (2)
(b) Producer surplus at price P
Price
Supply
Additional producer
surplus to initial
producers
P2
P1
D
E
F
B
Initial
producer
surplus
C
Producer surplus
to new producers
A
0
Q1
Q2
Quantity
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Figure 7 The Effect of a Subsidy on the Price of Gasoline
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Figure 8 Consumer and Producer Surplus in the Market
Equilibrium
Price A
D
Supply
Consumer
surplus
Equilibrium
price
E
Producer
surplus
B
Demand
C
0
Equilibrium
quantity
Quantity
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Figure 9 The Efficiency of the Equilibrium Quantity
Price
Supply
Value
to
buyers
Cost
to
sellers
Cost
to
sellers
0
Value
to
buyers
Equilibrium
quantity
Value to buyers is greater
than cost to sellers.
Demand
Quantity
Value to buyers is less
than cost to sellers.
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