Producer_surplus_Slides_Fig_3_Landscape

Producer_surplus_Slides_Fig_3_Landscape - a and areas a + b...

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VMP = MP x p S o (w 0 ) S 1 (w 1 ) P o w 1 w 0 x 0 x 1 w x q p Figure 3: Producer Surplus and Consumer Surplus of Input Demand Input market Output market q 1 q 0 y z a b c d e @ w 0 , TR = areas a + b + d (sum of p*MP x @ each x) VC = areas b + d (=w o *x o ) @ w 1 , TR = areas a + b + c + d + e VC = areas d + e So Δ PS or quasi-rent = areas b + c = area z Consumer surpluses = area
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Unformatted text preview: a and areas a + b + c CV = EV CV = $ wtp for ↓ in w (just as well off as @ w 1 ) EV = $ wac to forego lower w (just as well off as @ w o ) Can do simultaneous change in p and w; have many inputs – see JHS...
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This note was uploaded on 02/22/2009 for the course ECON 4300 taught by Professor Degorter during the Spring '09 term at Cornell.

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