ECON 2100 Lecture Notes - Lecture 7: Demand Curve, Economic Surplus

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taupefrog756

21 Sep 2016

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Chapter 7- consumers, producers, and the efficiency of markets. Welfare economics studies how the allocation of resources affects economic well-being. How much of each good is produced. A buyer"s willingness to pay for a good is the maximum amount the buyer will pay for that good. Wtp measures how much the buyer values the good. Example: if there are four people and they want to buy an ipod, they will each have their own. Anthony wtp: chad: 175 flea: 300 john: 125. Anthony and flea because there wtp is at or above the price for the ipod. If the price of the ipod goes down, then eventually chad will be able to buy it and then john at some point. Graph: a staircase shape with price vs. number of buyers. The more buyers, the smaller the steps on the graph are. Marginal buyer- the buyer who would leave the market if price were any higher.

Related Questions

Demand curve:

The demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at any given price. It is a graphic representation of a market demand schedule. The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together, assuming independent decision-making. Demand curves are used to estimate behaviors in a competitive market and are often combined with supply curves to estimates the equilibrium price. Demand curves are usually considered as theoretical structures that are expected to exist in the real world, but real-world measurements of actual demand curves are difficult and rare.

The demand curve will move downward from the left to the right, which expresses the law of demand.

If the price of corn rises, consumers will have an incentive to buy less corn and substitute other foods, so the total quantity of corn consumers’ demand will fall. The degree to which rising price translates into falling demand is called demand elasticity or price elasticity of demand. If a factor besides price or quantity changes, a new demand curve needs to be drawn. For example, say that the population of an area explodes, increasing the number of mouths to feed. In this scenario, more corn will be demanded even if the price remains the same, meaning that the curve itself shifts to the right.

According to my view, the demand curve for the Apple Video iPod will increase. According to the given paragraph iPod is thinner and lighter. The hardware and software ecosystem offers good content options and also portable. These are the main qualities expected by the customers. Henceforth customer wants to buy this product in the future also. If the price of the product increases in the future the demand for the product also increases because customers demand more products thinking of price increase in the future. At the same time if the price decreases in this case also customers will buy the product because they think that the good product is coming at a reasonable price. The demand curve for Apple Video iPod in the future may be like follows.

What is your opinion on a competitor product which has similar features to that of an i-pad or say it is better than i-pad and is offered at a comparatively cheaper price, how this will affect the i-pad demand curve and why?

bronzemule740

When a monopoly lowers its price to increase quantity,

a. The quantity produced drives down marginal revenue

b. It will increase its profits

c. It will make less money on the units it would have orginally sold

d. It is not maximizing its profit

Which of the following statements is TRUE?

a. Both A and B

b. A monopoly can charge whatever it wants

c. Profit maximizatin occurs by setting price first

d. A monopoly cannot set price and quantity such that the point lies above the demand curve

A monopoly that is maximizing profits operates is the _______ portion of the demand curve

a. Unitary elastic

b. Horizontal

c. Elastic

d. Inelastic

A monopoly shuts down when,

a. The long run price is below its average variable cost

b. Never, because it can raise its prices as high as necessary to keep operating and maximizing profits

c. The short run price is below its average variable cost

d. The average cost is less than price

The ability of a monopoly to charge a price that exceeds marginal cost depends on,

a. Shape of the marginal cost curve

b. The price elasticity of supply

c. Price elasticity of demand

d. Slope of the demand curve

Which of the following could create a cost advantage for a monopoly?

a. Lower friction due to better organization

b. Better technology

c. All of the above

d. Standardization

Price discrimination,

a. Is illegal in the U.S.

b. Is when consumers use prices to discriminate between different quality products

c. Is a form of pricing where consumers pay different prices for a good

d. Allows firms to set a single intermediate price between consumers' low and high willingness to pay

Which of the following is likely hardest to resell?

a. The free facial you won at a raffel

b. An apple iPod

c. A coupon for a free haircut

d. A discount airline tickey you bought with your frequent flyer miles

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities; then,

a. Consuers who buy larger quantities have a higher price elastiity of demand

b. Consumers who buy smaller quantities have a lower price elasticity of demand

c. Both A and C

d. Consumers who buy larger quantities have a lower price elasticity of demand

Purchasing a season pass t the local symphony,

a. Is an example of third degree price discrimination

b. Is an example of second degree price discrimination

c. Is an example of first degree price discrimination

d. All of the above

Look at the two tables below, which show, respectively, the willingness to pay and willingness to accept of buyers and sellers of bags of oranges. For the following questions, assume that the equilibrium price and quantity will depend on the indicated changes in supply and demand. Assume that the only market participants are those listed by name in the two tables.

Consumers			Producers
Person	Maximum Price Willing to Pay	Actual Price (Equilibrium Price)	Person	Minimum Acceptable Price	Actual Price (Equilibrium Price)
Bob	$16	$10	Carlos	$5	$10
Barb	14	10	Courtney	6	10
Bill	13	10	Chuck	7	10
Bart	12	10	Cindy	8	10
Brent	11	10	Craig	9	10
Betty	10	10	Chad	10	10

a. Given the equilibrium price of $10, what is the equilibrium quantity given the data above?

Equilibrium quantity = ...... bag(s)

b. What if, instead of bags of oranges, the data in the two tables dealt with a public good like fireworks displays?

If all the buyers' free ride, what will be the quantity supplied by private sellers?

c. Assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a $3-per-bag tax on sellers.

What is the new equilibrium price? $

What is the new equilibrium quantity?
....bag(s)

If the new equilibrium quantity is the optimal quantity, by how many bags were oranges being overproduced before?

.....bag(s)

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ECON 2100 Lecture Notes - Lecture 7: Demand Curve, Economic Surplus

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