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SUPPLY AND DEMAND II: MARKETS AND WELFARE
2.
7 Consumers, Producers,
and the Efficiency of Markets
3.
4.
5.
6.
7.
8.
9.
Table 1 Four
Possible Buyers’ Willingness to Pay Copyright©2004 South-Western
10.
11.
The Demand Schedule
and the Demand Curve
12.
Figure 1 The
Demand Schedule and the Demand Curve Copyright©2003 Southwestern/Thomson Learning Price of Album 0 Quantity of Albums 1 2 3 4 Demand $100 John ’ s willingness to pay 80 Paul ’ s willingness to pay 70 George ’ s willingness to pay 50 Ringo ’ s willingness to pay
13.
Figure 2 Measuring
Consumer Surplus with the Demand Curve Copyright©2003 Southwestern/Thomson Learning (a) Price = $80 Price of Album 50 70 80 0 $100 1 2 3 4 Quantity of Albums Demand John ’ s consumer surplus ($20)
14.
Figure 2 Measuring
Consumer Surplus with the Demand Curve Copyright©2003 Southwestern/Thomson Learning (b) Price = $70 Price of Album 50 70 80 0 $100 1 2 3 4 Quantity of Albums Demand Total consumer surplus ($40) John ’ s consumer surplus ($30) Paul ’ s consumer surplus ($10)
15.
16.
Figure 3 How
the Price Affects Consumer Surplus Copyright©2003 Southwestern/Thomson Learning Quantity (a) Consumer Surplus at Price P Price 0 Consumer surplus Demand P 1 Q 1 B A C
17.
Figure 3 How
the Price Affects Consumer Surplus Copyright©2003 Southwestern/Thomson Learning Quantity (b) Consumer Surplus at Price P Price 0 Initial consumer surplus Demand A B C D E F P 1 Q 1 P 2 Q 2 Consumer surplus to new consumers Additional consumer surplus to initial consumers
18.
19.
20.
Table 2 The
Costs of Four Possible Sellers Copyright©2004 South-Western
21.
22.
The Supply Schedule
and the Supply Curve
23.
Figure 4 The
Supply Schedule and the Supply Curve
24.
25.
Figure 5 Measuring
Producer Surplus with the Supply Curve Copyright©2003 Southwestern/Thomson Learning Quantity of Houses Painted Price of House Painting 500 800 $900 0 600 1 2 3 4 (a) Price = $600 Supply Grandma ’ s producer surplus ($100)
26.
Figure 5 Measuring
Producer Surplus with the Supply Curve Copyright©2003 Southwestern/Thomson Learning Quantity of Houses Painted Price of House Painting 500 800 $900 0 600 1 2 3 4 (b) Price = $800 Georgia ’ s producer surplus ($200) Total producer surplus ($500) Grandma ’ s producer surplus ($300) Supply
27.
Figure 6 How
the Price Affects Producer Surplus Copyright©2003 Southwestern/Thomson Learning Quantity (a) Producer Surplus at Price P Price 0 Producer surplus Supply B A C Q 1 P 1
28.
Figure 6 How
the Price Affects Producer Surplus Copyright©2003 Southwestern/Thomson Learning Quantity (b) Producer Surplus at Price P Price 0 P 1 B C Supply A Initial producer surplus Q 1 P 2 Q 2 Producer surplus to new producers Additional producer surplus to initial producers D E F
29.
30.
31.
32.
33.
34.
Figure 7 Consumer
and Producer Surplus in the Market Equilibrium Copyright©2003 Southwestern/Thomson Learning Price 0 Quantity Producer surplus Consumer surplus Equilibrium price Equilibrium quantity Supply Demand A C B D E
35.
36.
Figure 8 The
Efficiency of the Equilibrium Quantity Copyright©2003 Southwestern/Thomson Learning Quantity Price 0 Supply Demand Cost to sellers Cost to sellers Value to buyers Value to buyers Value to buyers is greater than cost to sellers. Value to buyers is less than cost to sellers. Equilibrium quantity
37.
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