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Ch 2 Unit3

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Transcript

  • 1. Managerial Economics & Business Strategy Chapter 2 goes with unit three Demand and Supply
  • 2. Overview
    • Consumer and Producer Surplus
  • 3. Consumer Surplus:
    • The value consumers get from a good but do not have to pay for.
  • 4. I got a great deal!
    • That company offers a lot of bang for the buck!
    • Dell provides good value but questionable service
    • If total value greatly exceeds total amount paid.
    • Then consumer surplus is large.
  • 5. I got a lousy deal!
    • That car dealer drives a hard bargain!
    • I almost decided not to buy it!
    • They tried to squeeze the very last cent from me!
    • Total amount paid is close to total value.
    • Consumer surplus is low .
  • 6. Consumer Surplus: The Discrete Case Price Quantity D 10 8 6 4 2 1 2 3 4 5 Consumer Surplus: The value received but not paid for. Consumer surplus = (8-2) + (6-2) + (4-2) = $12.
  • 7. Consumer Surplus: The Continuous Case Price $ Quantity D 10 8 6 4 2 1 2 3 4 5 Expenditure on 4 units = $2 x 4 = $8 Value of 4 units = $24 C onsumer Surplus = $24 - $8 = $16
  • 8. Producer Surplus
    • The amount producers receive in excess of the amount necessary to induce them to produce the good.
    Price Quantity S 0 Q * P *

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