Lecture%205%20February%202

Lecture%205%20February%202 - Todays agenda Consumer surplus...

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Unformatted text preview: Todays agenda Consumer surplus Producer surplus A first look at the case for market allocation Weekly review/problem/Q&A sessions Ms. Basak Uysal Wednesday , 1:10 to 2:30 p.m. 219 Scott Hall, College Avenue Campus Mr. Cheng Gao Thursday , 9:50 to 11:10 a.m. 214 Scott Hall, College Avenue Campus Aplia grace period ends at midnight Monday If you have not paid by then, you will be unable to see or submit homework you will lose access to the digital version of the textbook Suppose that in the market for home appendectomy kits demand is described by the equation Q = 400 5P and supply is described by the equation P = 0.2Q . The equilibrium price is: A. 40 B. 30 C. 20 D. 10 E. 0 Consumer surplus Demand curve: schedule of maximum willingness to pay for consumers Q $/Q S D Consumer surplus Consumer surplus Q $/Q S D Consumer surplus Q $/Q S D Consumer surplus Total expenditure Consumer surplus Q $/Q S Supply curve: schedule of minimum necessary compensation for producers Q $/Q S Supply curve: schedule of incremental costs of producers Supply curve: schedule of incremental costs of producers Revenue on first unit exceeds marginal cost Revenue on first unit exceeds marginal cost Producer surplus on first unit Revenue on all units exceeds marginal cost Revenue on all units exceeds marginal cost (except the last) Producer surplus Q $/Q S P Producer surplus: (P-MC) summed over all units supplied If an early freeze in California ruins the lemon crop, consumer surplus in the market for lemons will A. increase. B. decrease. C. be unaffected. D. Increase or decrease depending upon the shape of the demand curve. Q $/Q S D Consumer surplus Total expenditure Consumer surplus Arguments for market allocation Markets solve the coordination problem effectively. Prices serve as signals of relative scarcity....
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This note was uploaded on 03/08/2011 for the course ECON 220 taught by Professor Cai during the Spring '08 term at Rutgers.

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Lecture%205%20February%202 - Todays agenda Consumer surplus...

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