Consumers Producers and the Efficiency of Markets Copyright

Consumers, Producers, and the Efficiency of Markets Copyright © 2011 Cengage Learning 7

Table 1 Four Possible Buyers’ Willingness to Pay Copyright © 2011 Cengage Learning

Figure 1 The Demand Schedule and the Demand Curve (1) Copyright © 2011 Cengage Learning Copyright © 2010 Cengage Learning

Figure 1 The Demand Schedule and the Demand Curve (2) Price of album Liam’s willingness to pay € 100 Paul’s willingness to pay 80 Noel ’s willingness to pay 70 Tony ’s willingness to pay 50 Demand 0 1 2 3 4 Quantity of albums Copyright © 2011 Cengage Learning

Figure 2 Measuring Consumer Surplus with the Demand Curve (1) (a) Price = € 80 Price of album € 100 Liam’s consumer surplus (€ 20) 80 70 50 Demand 0 1 2 3 4 Quantity of albums Copyright © 2011 Cengage Learning

Figure 2 Measuring Consumer Surplus with the Demand Curve (2) (b) Price = € 70 Price of album € 100 Liam’s consumer surplus (€ 30) 80 Paul’s consumer surplus (€ 10) 70 50 Total consumer surplus (€ 40) Demand 0 1 2 3 4 Quantity of albums Copyright © 2011 Cengage Learning

Figure 3 How the Price Affects Consumer Surplus (1) (a) Consumer surplus at price P Price A Consumer surplus P 1 B C Demand 0 Q 1 Quantity Copyright © 2011 Cengage Learning

Figure 3 How the Price Affects Consumer Surplus (2) (b) Consumer surplus at price P Price A Initial consumer surplus P 1 P 2 0 C B Consumer surplus to new consumers F D E Additional consumer surplus to initial consumers Q 1 Demand Q 2 Quantity Copyright © 2011 Cengage Learning

Table 2 The Costs of Four Possible Sellers Copyright © 2011 Cengage Learning

Figure 4 The Supply Schedule and the Supply Curve (1) Copyright © 2011 Cengage Learning Copyright © 2010 Cengage Learning

Figure 4 The Supply Schedule and the Supply Curve (2) Copyright © 2011 Cengage Learning

Figure 5 Measuring Producer Surplus with the Supply Curve (1) (a) Price = € 600 Price of house painting Supply € 900 800 600 500 Nana’s producer ’ surplus (€ 100) 0 1 2 3 4 Quantity of houses painted Copyright © 2011 Cengage Learning

Figure 5 Measuring Producer Surplus with the Supply Curve (2) (b) Price = € 800 Price of house painting € 900 Supply Total producer surplus (€ 500) 800 600 Georgia’s producer surplus (€ 200) 500 Nana’s producer ’ surplus (€ 300) 0 1 2 3 4 Quantity of houses painted Copyright © 2011 Cengage Learning

Figure 6 How the Price Affects Producer Surplus (1) (a) Producer surplus at price P Price Supply P 1 B Producer surplus C A 0 Q 1 Quantity Copyright © 2011 Cengage Learning

Figure 6 How the Price Affects Producer Surplus (2) (b) Producer surplus at price P Price Supply Additional producer surplus to initial producers P 2 P 1 D E F B Initial producer surplus C Producer surplus to new producers A 0 Q 1 Q 2 Quantity Copyright © 2011 Cengage Learning

Figure 7 The Effect of a Subsidy on the Price of Gasoline Copyright © 2010 Cengage Learning

Figure 8 Consumer and Producer Surplus in the Market Equilibrium Price A D Supply Consumer surplus Equilibrium price E Producer surplus B Demand C 0 Equilibrium quantity Quantity Copyright © 2011 Cengage Learning

Figure 9 The Efficiency of the Equilibrium Quantity Price Supply Value to buyers Cost to sellers 0 Value to buyers Equilibrium quantity Value to buyers is greater than cost to sellers. Demand Quantity Value to buyers is less than cost to sellers. Copyright © 2011 Cengage Learning