lec04slides

# lec04slides - MONETARY MEASURES OF GAIN AND LOSS 1...

This preview shows pages 1–8. Sign up to view the full content.

1 MONETARY MEASURES OF GAIN AND LOSS 2 Consumer’s Demand Curve Market demand curve is the sum of individual demand curves.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
3 Marginal Willingness to Pay = MWTP x = Amount of money that a person is willing to pay to obtain an extra unit of good X. Long Distance Calls MWTP 1 \$8.00 26 . 0 0 34 . 5 0 43 . 0 0 52 . 0 0 61 . 5 0 4 Law of Diminishing MWTP MWTP x decreases as consumption of good X increases.
5 Graph MWTP: P Q 1 2 3 4 5 6 8.00 6.00 4.50 3.00 2.00 1.50 6 Graph MWTP: P Q 1 2 3 4 5 MWTP 8.00 6.00 4.50 3.00 2.00 1.50

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
7 Graph MWTP: P Q 1 2 3 4 5 P MWTP = D 8.00 6.00 4.50 3.00 2.00 1.50 8 Demand Curve = MWTP curve Demand curve tells: At any price, how much will person buy. At any quantity, what is person’s MWTP.
9 Consumer obtains benefits in excess of amount paid. Suppose price = \$1.50 Calls MWTP Price paid Surplus 1 8.00 1.50 6.50 2 6.00 1.50 4.50 3 4.50 1.50 3.00 43 . 0 01 . 5 0 1 . 5 0 5 2.00 1.50 0.50 61 . 5 . 5 0 0 16.00 14 Consumer surplus = Area under demand curve and above price P Q 1 2 3 4 5 6 MWTP = D

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
16 Original Consumer Surplus P Q p 1 17 Q P P 2 P 1 D New Consumer Surplus
18 Q P P 2 P 1 D Change in Consumer Surplus 19 Example: Gas Tax D S 1.00 1.20 10 b 8 b

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 11/28/2010 for the course ECON 1 taught by Professor Martholney during the Fall '08 term at Berkeley.

### Page1 / 15

lec04slides - MONETARY MEASURES OF GAIN AND LOSS 1...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online