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1、7Consumers,Producers,andtheEfficiencyofMarketsPRINCIPLESOFMICROECONOMICSFOURTHEDITIONN.GREGORYMANKIWPremiumPowerPoint®SlidesbyRonCronovich2007update©2008ThomsonSouth-Western,allrightsreservedInthischapter,lookfortheanswerstothesequestions:§Whatisconsumersurplus?Howisitrelatedt
2、othedemandcurve?§Whatisproducersurplus?Howisitrelatedtothesupplycurve?§Domarketsproduceadesirableallocationofresources?Orcouldthemarketoutcomebeimprovedupon?CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS1WelfareEconomics§Recall,theallocationofresourcesrefersto:•howmuchofeachg
3、oodisproduced•whichproducersproduceit•whichconsumersconsumeit§Welfareeconomics§First,welookatthewell-beingofconsumers.CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS21WillingnesstoPay(WTP)Abuyer’swillingnesstopayforagoodWTPmeasuresnameWTPExample:4buyers’WTPAnthony$250foraniPod
4、Chad175Flea300John125CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS3WTPandtheDemandCurveDerivetheP(pricedemandwhobuysQdofiPod)schedule:$301&upnameWTP251–300Anthony$250176–250Chad175126–175Flea300John1250–125CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS5WTPandtheDemandCurveP
5、$350PQd$300$250$200$150$100$50$0Q01234CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS62AbouttheStaircaseShape…PThisDcurvelookslikeastaircase$350with4steps–oneperbuyer.$300Iftherewereahuge#ofbuyers,$250asinacompetitivemarket,$200therewouldbeahuge#ofverytinysteps,$150anditwouldl
6、ook$100morelikeasmoothcurve.$50$0Q01234CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS7WTPandtheDemandCurvePFlea’sWTPAtanyQ,$350theheightof$300Anthony’sWTPtheDcurveistheWTPofthe$250Chad’sWTPmarginalbuyer,$200John’sWTPthebuyerwho$150wouldleavethemarketifPwere$100anyhigher.$50$0
7、Q01234CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS8ConsumerSurplus(CS)ConsumersurplusSupposeP=$260.nameWTPFlea’sCS=Anthony$250Chad175Flea300John125CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS93CSandtheDemandCurvePFlea’sWTPP=$260$350Flea’sCS=$300$250$200TotalCS=$40$150$10
8、0$50$0Q01234CHAPTER7CONSUMERS,PRODUCERS,EFFICIENCYOFMARKETS10
