lecture 15 - LECTURE 15: HOUSEHOLD DECISION-MAKING AND...

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LECTURE 15: HOUSEHOLD DECISION-MAKING AND SOCIETAL GAINS - how much does an individual gain from a market (done) - how much does everybody gain from a market. Application of consumer surplus Mankiw: Chapter 7
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2010: LECTURE 15 2 CAN WE DETERMINE SOCIETAL MB CURVE? SOCIETAL MB AND MARKET D CURVES ARE SAME Individual D and MB: Tom Susan Richard Society: Market Society
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2010: LECTURE 15 3 At price 5 ($/unit), - Tom buys 20 and MB is 5 ($/unit). - Susan buys 10 and MB is 5 ($/unit) - Richard buys 30 and MB is 5 ($/unit) When price 5, quantity= 60 and everybody has MB=5. If extra unit produced and given to Tom: Tom’s benefit increased 5 Susan’s benefit increased 0 Richard’s benefit increased 0 Total benefit 5 If extra unit produced and given to Susan: Tom’s benefit increased 0 Susan’s benefit increased 5 Richard’s benefit increased 0 Total benefit 5
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2010: LECTURE 15 4 If 60 units produced, MB of extra unit is 5 ($/unit) - irrespective of who gets it. At price 10 ($/unit),
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lecture 15 - LECTURE 15: HOUSEHOLD DECISION-MAKING AND...

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