ECON 111 - C7 - In this chapter look for the answers to...

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In this chapter,look for the answers to these questions:::i::n.I.i 1:, ;:iJi: i{r:r.)j iili..,r!,,:: i..i::rii.^tBasic Supply and Demand GraphWelfare EconomicsRecall, the allacati*n af re$ourc&s refers to:. how much of each good is produced' which producers produce it" which consumers consume it@ studies howthe allocationof resources affects economic well-being.First, we look at the well-being of consumers.Basic Supply and Demand GraphWhy is this theefficient allocationof resources?il;jru.:;r!a:li!!:r:.i:r,:ii::r'...-riii!:r:!,ri:rii 3 L,.fxii:i1_Jrll:i;'-1,,if|t*iWith the shit left (up)of supply, some buyersdrop out of the market.A 6 wtllil3,ness)I UIB + buyer J bwy q ooJs1 qd + sdl.r - sell OHow is it related to theHow is it related to thePriceWillingness trl Pay {WTP) qA buyer'sglllilglq:s..lapg1 for a sood is themaximum amount the buyerwill pay for that good.WTP measure{now much the buyervalues the Oood.)nameWTPAnthonlt$250Chad115Flea300John125Example:4 buyers'WTPfor an iPod
WTP and the Demand Curve&: lf price of iPod is $290l.who will buy an iPod, andwhat is quantity demanded?WTP and the Demand CunrenameWTPAnthony$250Chad175Flea300John125A: Anthony & Flea will buy an iPod,Chad & John will not.Hence, Qd=Zwhen P = $200.Derive thedemandschedule:$350$soo$250$2oo$150$too$so$odtnameWTPAnthony$250ChadL75Flea300John125P (priceof iPod)who buysQd$301 a upnobody0251 - 300Flea1176 - 25AAnthony, Flea2126 - 175Chad, Anthony,Flea3o-125John, Chad,Anthony, Flea4lf there were a huge # of buyers,as in a competitive market,there would be a huge #of very tiny steps,and it would lookmore like a smoothcurve.ar:,)r-rt 1r;jil ia, r:n,:: il{."tl,i: j.i::r:i;rAbout the Staircase Shape...This D curve looks like a staircasewith 4 steps -:gtrt$W!"$sso$3oo$250$2oo$150$t oo$so$o$aso$300$250$zoo$150$too$50$0t7sC.h"drSJohn01234il,.\v-iii:i ! liri: tl.i,,,: irj),.,,r:il,: i i. ir:WTP and the Demand Curve01234t + b"i;' ' 3'''1'iil""tihe a6/c t she-psConsumer Surplus {CS)a10srnoolh c-unleAt any Q,the height ofthe D curve isthe WTP of themar*inal bwtrcr.^.*<,#the buyer whowould leave themarket if P wereany higher.Cons-u_mer surplus is the amount a buyer is willingffiaf-rrlin0STfr EEilountthebuyeractuallypays:ics; tnf;"F iaSuppose P = [email protected]Flea's CS = $300 - 260 = $40.The others get no CS becausethey do not buy an iPod at thisprice.TotalCS = $40.0123a'if'lii'.1,i -' r:li4\:i!I' llir.;::iif i i.,itt:name,'WTPAhthony$250Chad115Flea300John125I = Zo0 -+ b*v'f .ro, , x' 4tu.*WTP and the Demand Curvefl,eq-2S o,ArtlJ^onyP ,300PQd$301 & up02513001176 -250212617530-1254
$sso$300szsi--CS and the Demand CurueCS and the Demand Cunzelnstead, supposep = g22AFlea's CS =A*her-/s $300 - z2o = $,80cS (3d ) Anthony's CS =5250-220=$30cPa"r cs = $ll-Q-$200$tso$100$so$o$sso$300$250$200$1so$too$50$ooCS and the Demand Curve5040$200$150$100$so$0201000 510il:,'i,\r.ciir i lij: ijrje.ti.

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