Chapter9 - Part 1

Chapter9 - Part 1 - The Analysis of Competitive Markets...

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The Analysis of Competitive Markets Chapter 9
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Chapter Outline Evaluating the Gains and Losses from Government Policies—Consumer and Producer Surplus The Efficiency of a Competitive Market The Impact of a Tax or Subsidy
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Consumer A would pay $10 for a good whose market price is $5 and therefore enjoys a benefit of $5. Consumer B enjoys a benefit of $2, and Consumer C , who values the good at exactly the market price, enjoys no benefit. Consumer surplus, which measures the total benefit to all consumers, is the yellow-shaded area between the demand curve and the market price. Review of Consumer and Producer Surplus
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Producer surplus measures the total profits of producers, plus rents to factor inputs. It is the green-shaded area between the supply curve and the market price. Together, consumer and producer surplus measure the welfare benefit of a competitive market. Review of Consumer and Producer Surplus
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welfare effects Gains and losses to consumers and producers. The price of a good has been regulated to be no higher than P max , which is below the market-clearing price P 0 . The gain to consumers is
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This note was uploaded on 02/06/2012 for the course ECON 293 taught by Professor Akbulut during the Spring '11 term at South Carolina.

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Chapter9 - Part 1 - The Analysis of Competitive Markets...

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