Equilibrium price/quantity, consumer vs. producer surplus

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Department
Agriculture + Resrce Econ
Course
AREC 202
Professor
Christopher Goemans
Semester
Fall

Description
14 September Review Supply Cost of production for each unit (not total) Minimum willingness to accept Marginal cost Demand Maximum willingness and ability to pay (also per unit) Value of each unit Marginal benefit Marginal: unit by unit Why does this market converge to an equilibrium price and quantity? Why stay at one price? 3 people selling fish 2 @ $10, 1 @ $11 Identical fish and sellers You’ll buy for $10 Won’t get a profit trying to sell for more or less Problem: excess supply “surplus” More quantity supplied than quantity demanded Prices tend to be driven downward Excess demand “shortage” Starts at an unreasonably low price This tends to drive prices upwards until quantity supplied = quantity demanded Situation: Price of tortillas goes up. What will happenQto E aPd E ? EPgoes up, E Qoes down Situation: Study shows that burritos are not healthy EPgoes down, E gQes down Growing corn: unexpectedly good weather Higher EQ, lower EP What if the price of tortillas goes up and negative burrito study is published? EPgoes down EQdoes not stay the same (although it may appear to) Consistently when demand goes down a
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