Feb 3 (week four) - EC 201 February 3, 2009 Review Supply,...

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EC 201 EC 201 February 3, 2009 February 3, 2009 Review Supply, Demand, Equilibrium i. Demand curves slopes downward ii. Shifts in demand curve Decrease in Qd = shift left Increase in Qd = shift right If household income falls??????? Demand curve shifts left iii. Supply Curve slopes upward iv. Shifts in supply curve v. Market Equilibrium Example for test Demand (drink umbrellas) Prices Fred’s Mikes’s Steve’s Market (sum) $1 100 200 150 450 $.9 200 400 300 900 $.8 300 600 450 1350 $.7 400 800 600 1800 $.6 500 1000 750 2250 $.5 600 1200 900 2700 Supply Prices Supplier One Supplier Two Market (sum) $.5 1000 800 1800 $.6 1250 1000 2250 $.7 1500 1200 2700 $.8 1750 1400 3150 $.9 2000 1600 3600 $1 2250 1800 4050
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vi. Changes in Equilibrium Example: increase in price of wool on market sweaters vii. Price Floors and Ceilings viii. Consumer surplus Willingness to pay Cost benefit Producer Surplus Willingness to sell = cost Cost = opportunity cost for some markets
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Sellers Cost Andrew 5 Steve 15 Anna 25 Phil 35
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Nicole 45 Producer Surplus 0 5 10 15 20 25 30 35 40 45 50 1 2 3 4 5 Sellers Cost At a price of $30, 3 books are sold Individual producer surplus  o Andrew’s PS = 30 – 5 = 25 Total Producer Surplus o Sum of PS o (25) + (20-15) + (30-25) = 45 Markets Gain from Trade Role of the Market Claim: often (not always!) maximizes efficiency Efficiency: consumer + producer surplus
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This note was uploaded on 02/19/2009 for the course ECON 201 taught by Professor C.liedholm during the Spring '07 term at Michigan State University.

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Feb 3 (week four) - EC 201 February 3, 2009 Review Supply,...

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