Principles of Economics- Mankiw (5th) 143

Principles of Economics- Mankiw (5th) 143 - CHAPTER 7...

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CHAPTER 7 CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS 149 USING THE SUPPLY CURVE TO MEASURE PRODUCER SURPLUS Just as consumer surplus is closely related to the demand curve, producer surplus is closely related to the supply curve. To see how, let’s continue our example. We begin by using the costs of the four painters to find the supply schedule for painting services. Table 7-4 shows the supply schedule that corresponds to the costs in Table 7-3. If the price is below $500, none of the four painters is willing to do the job, so the quantity supplied is zero. If the price is between $500 and $600, only Grandma is willing to do the job, so the quantity supplied is 1. If the price is between $600 and $800, Grandma and Georgia are willing to do the job, so the quantity supplied is 2, and so on. Thus, the supply schedule is derived from the costs of the four painters.
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