ECON 102 Lecture Notes - Lecture 12: Pink Triangle, Economic Surplus

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Changes in the surplus of the producer: If the price of a good increases, producers of the good will experience an increase in the surplus of the commodity, but not all producers benefit the same amount. Even at the original price, some producers will have created the good; they would receive the entire price increase on each unit they make. Owing to the higher price, other suppliers will enter the market; they"ll only receive the difference between the new price and their cost. Figure 5-9 is a supply counterpart of figure 5-5 on page 120. This shows the effect of a wheat price increase from to per bushel on the producers surplus. The overall shaded field, which consists of two sections, is the increase in producer surplus. Second, there"s a red rectangle that matches the profits to those farmers who would have supplied wheat even at the original mark.

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