Transcript Individual Markets:

Voluntary Exchange
Voluntary Exchange
In the free-market, buyers and sellers voluntarily come
together to seek mutual benefits.
Voluntary Exchange
In the free-market, buyers and sellers voluntarily come
together to seek mutual benefits.
Voluntary Exchange
In the free-market, buyers and sellers voluntarily come
together to seek mutual benefits.
Voluntary Exchange
In the free-market, buyers and sellers voluntarily come
together to seek mutual benefits.
Example of Voluntary Exchange
You want to buy a truck so you go to the local dealership.
You are willing to spend up to $20,000 for a new 4x4.
The seller is willing to sell this truck for no less than $15,000.
After some negotiation you buy the truck for $18,000.
Analysis:
Buyer’ Maximum- $20,000
Sellers Minimum- $15,000
Price- $18,000
Consumer’s Surplus- $2,000
Producer’s Surplus- $3,000
Voluntary Exchange Terms
Consumer Surplus is the difference
between what you are willing to pay and
what you actually pay.
CS = Buyer’s Maximum – Price
Producer’s Surplus is the difference
between the price the seller received and
how much they were willing to sell it for.
PS = Price – Seller’s Minimum
The Pearl Exchange
WARNING: Many students complain that
their teachers don’t do enough hands-on
activities. Many teachers complain that
hands-on activities are a waste of time
because the students slack off. I promise to
create fun and meaningful activities, if you
promise to actively participate and stay
focused. NO ANCHORS!
The Pearl Exchange
There will be four trading sessions.
In each session, you can only buy or sell ONCE.
When you make a deal, shake hands and come to the
board to record your negotiated price. Then go back to
your seat and record your surplus in the table.
If you do not make a sale or purchase, you take the
entire minimum or maximum price for a LOSS.
Are you the best negotiator in the class? Let’s find out.
Good Luck!
Supply and Demand Analysis
Easy as 1, 2, 3
1. Before the change:
• Draw supply and demand
• Label original equilibrium price and quantity
2. The change:
• Did it affect supply or demand first?
• Which determinant caused the shift?
• Draw increase or decrease
3. After change:
• Label new equilibrium?
• What happens to Price?
• What happens to Output (Quantity)?
Voluntary Exchange Activity