Uploaded bySue Guzek
Slides for video chapter 7 consumers producers and efficiency
This document provides an overview of key economic concepts related to consumers, producers, and the efficiency of markets. It defines willingness to pay, consumer surplus, cost, and producer surplus. It explains that consumer surplus is the difference between what a consumer is willing to pay for a good and what they actually pay. Producer surplus is the difference between the price received and the cost of producing a good. The document states that market efficiency is achieved when total surplus, the sum of consumer and producer surplus, is maximized. This maximizes the overall benefit to society.
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Slides for video chapter 7 consumers producers and efficiency
- 1. PRINCIPLES OF MACROECONOMICS Text:Principles of Macroeconomics, N. Gregory Mankiw, Sixth Edition. Instructor: Sue Guzek, Kansas State University Salina Music: We Gonna Make You… By Troy “Trombone Shorty” Andrews and Orleans Avenue – Orleans and Claiborne 1 CONSUMERS, PRODUCERS, AND EFFICIENCY OF MARKETS
- 2. CUSTOMER SURPLUS ANDWILLINGNESS TO PAY 2 Willingness to pay is the maximum amount a buyer is willing to pay for a good
- 3. HOW MUCH AREYOU WILLING TO PAY FOR… 3 Consumer Surplus is the amount a buyer is willing to pay for a good MINUS the amount the buyer actually pays
- 4. CONSUMER SURPLUS 4 Consumer Surplusis the amount a buyer is willing to pay for a good MINUS the amount the buyer actually pays MINUS
- 5. CONSUMER SURPLUS 5 A vanilla Bean Frappucino sellsfor $3.20 On a hot August day, (after a night of studying, you might be willing to pay $4 Your Consumer Surplus that day would be….. 80 ¢
- 6. CONSUMER SURPLUS ANDTHE DEMAND CURVE Willingness to Pay= height of the Demand Curve Surplus = space between the curve and the price 6 As Price falls, Qd rises Consumer Surplus rises because of: lower price and new buyers
- 7. WHAT DOES CONSUMERSURPLUS MEASURE? 7 The benefit buyers receive from a good…. AS THEY PERCEIVE IT
- 8. COST AND WILLINGNESSTO SELL Cost is the value of everything a seller must give up to produce a good 8
- 9. PRODUCER SURPLUS Theamount a seller is paid for a good MINUS the Seller’s cost of providing it 9
- 10. MEASURING SELLER SURPLUS Producer Surplus = Price – Cost to Produce 10 When price rises, Qs rises and Producer Surplus rises, because of increased price and new producers
- 11. MARKET EFFICIENCY Efficiency:Maximizing total surplus received by all members of society 11 Total Surplus = Value to Buyers – Cost to Sellers
- 12. EQUALITY Distributing economicprosperity uniformly among members of society 12
- 13. EVALUATING MARKET EQUILIBRIUM FREE MARKETS: Allocate goods to buyers who value them most, as measured by willingness to pay Allocate demand to sellers who produce at lowest cost Produce the quantity of goods to maximize the sum of consumer and producer surplus 13
- 14. HOW MUCH WOULDYOU PAY??? 14 See pages 148 and 149 n the text book
- 15. TERMS AND CONCEPTS Willingness to pay Consumer Surplus Cost Producer Surplus Efficiency Equality 15
- 16. SOURCES Principles of Macroeconomics,N. Gregory Mankiw, Sixth Edition: PowerPoint Slides prepared by: Andreea CHIRITESCU, Eastern Illinois University 16
Editor's Notes
- #2 In this chapter, we will learn about how economists measure buyer willingness to pay and seller willingness to sell