CHAPTER 4C CONSUMER SURPLUS

CHAPTER 4C CONSUMER SURPLUS - ECON 306 CLASS HANDOUT...

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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 ECON 306 CLASS HANDOUT CONSUMER SURPLUS WILLINGNESS TO PAY CONSUMER SURPLUS MAXIMUM CONSUMER SURPLUS PRODUCER SURPLUS APPLICATION: TAXES AND ELASTICITIES APPLICATION: THE IPOD PROBLEM AGAIN
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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 ALTERNATIVE DOLLAR METRIC OF UTILITY: WILLINGNESS TO PAY Price Quantity 6 6 5 0 1 5 4 3 2 4 3 2 1 a b c d e f Willingness-to-Pay unit 1 = a = 5.5 unit 2 = b = 4.5 unit 3 = c = 3.5 unit 4 = d = 2.5 unit 5 = e = 1.5 unit 6 = f = 0.5 Total = ? Price Quantity Demand Curve P = 6 - Q 6 6 5 0 1
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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 Price Quantity Demand Curve P = 6 - Q 6 6 0 1 Supply = MC = 3 3 3 Price Quantity Demand Curve P = 6 - Q 6 6 0 1 Supply = MC = 3 3 3 2 WTP = 5.5+4.5+3.5 = 13.5 COST = 3 + 3 + 3 = 9.0 SURP = 2.5+1.5+0.5 = 4.5
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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 SEE THE INVISIBLE HAND Q 6 6 0 1 3 3 2 P MC Q 4.5 6 0 1 2.5 3 2 TOT CS 4.0 2.5 1.5 0.5
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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010
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This note was uploaded on 09/07/2011 for the course ECON 306 taught by Professor Cramton during the Spring '06 term at Maryland.

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CHAPTER 4C CONSUMER SURPLUS - ECON 306 CLASS HANDOUT...

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