040313

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040313

  1. 1. Surplus & Marginal Revenue April 3, 2013
  2. 2. Announcements• Comments on site: Bravo! – econ2ucsd.wordpress.com• Sabrina Asked: Should we register clickers? – Yes. Here.• William Said: I got my 4th edition online & delivered by Friday for $29. – Great! For those who still want 5th edition, I will reference both in homeworks. – The questions for this homework are identical in both versions, just different numbers.
  3. 3. Agenda for Today• Learning goal 1: Be able to measure consumer and producer surplus in various situations and verbalize what it is. – How: quiz-lecture-quiz feedback.• Learning goal 2: Draw the marginal revenue curve for any firm given demand. – How: will focus on definition first, and then practice with different equations for demand.
  4. 4. Clicker Practice: Frequency BBA. I have an i>clickerB. I have an i>clicker +C. I have an i>clicker 2D. I don’t have a clicker, but am able to answer because I am telekinetic.Last check: 147 registered in this class.
  5. 5. PD=R-aQ. PS=bQ. a,b,R>0. elasticity(S)>elasticity(D).A. CS > PSB. CS < PSC. CS = PSD. Can’t tell without more informationE. I don’t remember what elasticity is so my best answer is a guess.
  6. 6. Correct answer: A1 Recall the definition of elasticity.2 Find equilibrium (Q*,P*).3 Compute the areas of CS and PS using formula A=1/2*b*h.
  7. 7. Consider the following labor market when there is a price floor (minimum wage).wS=3+L wD=10-3/2L mw=6.5Is there an inefficiency? What is it called?A. No, equilibrium wage prevailsB. Yes, minimum wage causes dead weight lossC. Yes, minimum wage causes unemployment
  8. 8. Deadweight loss (DWL)• Write your definition down on a piece of paper.• After you finish, I’ll reveal my definition below:• DWL: The sum of total surplus lost due to a market imperfection.• What are the differences between your definition and mine?
  9. 9. Consider the following labor market when there is a price ceiling (minimum wage).wD=3+L wS=10-3/2L mw=6.5Is there an inefficiency? What is it called?A. No, equilibrium wage prevailsB. Yes, minimum wage causes dead weight lossC. Yes, minimum wage causes unemployment
  10. 10. Correct answer: B• An ``inefficiency’’ in this context is a loss of surplus.• Unemployment isn’t necessarily ``good,’’ but there is not a direct connection with efficiency here.
  11. 11. Marginal Revenue: Think• What is the geometric interpretation of total revenue?• How is this connected with marginal revenue?
  12. 12. Marginal Revenue Example: Simple Demand Curve P Q TR MR 2 8 16 16 4 6 24 8 6 4 24 0 8 2 16 -8
  13. 13. Marginal Revenue: Answer• What is the geometric interpretation of total revenue?• How is this connected with marginal revenue?

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