Transcript Micro_Module 49-13

Module
Micro: 13
Econ: 49
Consumer and
Producer Surplus
KRUGMAN'S
MICROECONOMICS for AP*
Margaret Ray and David Anderson
What you will learn
in this Module:
• The meaning of consumer surplus and
its relationship to the demand curve.
• The meaning of producer surplus and
its relationship to the supply curve.
Consumer Surplus
Consumer surplus
measures the
difference between
what a consumer is
willing to pay for a
good and what he/she
actually has to pay.
Willingness to Pay
• Willingness to pay and the demand curve
• Willingness to pay and consumer surplus
• The difference between what the consumer is
willing to pay and what the consumer actually
pays is the individual’s consumer surplus. It
represents the net gain in happiness for the
consumer. We measure it in dollars and call
it consumer surplus.
Calculating Consumer
Surplus
The area of the consumer
surplus triangle will be ½
(base) (height).
Producer Surplus
Producer surplus
measures the
difference between
the price producers
receive for a good and
the cost of producing
the good.
Cost and Producer
Surplus
• Cost and the supply curve
• Cost and producer surplus
Calculating Producer
Surplus
The area of the consumer
surplus triangle will be ½
(base) (height).
Changes in Price affect Consumer
and Producer Surplus
• If price decreases,
• Consumer surplus increases (willingness to
pay is the same, but the price paid is lower)
• Producer surplus deceases (costs are the
same, but the price received is lower)
• If price increases,
• Consumer surplus decreases (willingness to
pay is the same, but the price paid is higher)
• Producer surplus increases (costs are the
same, but the price received is higher)
Total Surplus =
Consumer Surplus + Producer Surplus
Figure 49.1 The Demand Curve for Used Textbooks
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Table 49.1 Consumer Surplus When the Price of a Used Textbook Is $30
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 49.2 Consumer Surplus in the Used-Textbook Market
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
New
Price
Figure 49.4 Consumer Surplus and a Fall in the Price of Used Textbooks
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 49.6 The Supply Curve for Used Textbooks
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Table 49.2 Producer Surplus When the Price of a Used Textbook Is $30
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 49.7 Producer Surplus in the Used-Textbook Market
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 49.8 Producer Surplus
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 49.9 A Rise in the Price Increases Producer Surplus
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers