Chapter 9 The Analysis of Competitive Markets Chapter Outline Evaluating the Gains and Losses from Government Policies -Consumer and Producer Surplus The Efficiency of a Competitive Market ·Minimum Prices Price Supports and Production Quotas Import Quotas and Tariffs The Impact of a Tax or Subsidy
Chapter 9 The Analysis of Competitive Markets Chapter Outline • Evaluating the Gains and Losses from Government Policies —Consumer and Producer Surplus • The Efficiency of a Competitive Market • Minimum Prices • Price Supports and Production Quotas • Import Quotas and Tariffs • The Impact of a Tax or Subsidy
Evaluating the Gains and Losses from Government Policies -Consumer and Producer Surplus Price $10 Consumer Surplus 5 Producer Surplus o Quantity Consumer A Consumer B Consumer C Consumer and Producer Surplus
Evaluating the Gains and Losses from Government Policies —Consumer and Producer Surplus Consumer and Producer Surplus
Consumer A would pay $10 for a good whose market price is $5 and therefore enjoys a benefit of $5.Consumer B enjoys a benefit of $2,and Consumer C,who values the good at exactly the market price,enjoys no benefit.Consumer surplus,which measures the total benefit to all consumers,is the shaded area between the demand curve and the market price
Consumer A would pay $10 for a good whose market price is $5 and therefore enjoys a benefit of $5. Consumer B enjoys a benefit of $2, and Consumer C, who values the good at exactly the market price, enjoys no benefit. Consumer surplus, which measures the total benefit to all consumers, is the shaded area between the demand curve and the market price
Producer surplus is the shaded area between the supply curve and the market price.Together consumer and producer surplus measure the welfare benefit of a competitive market. >Welfare effects-Gains and losses caused by government intervention in the market
Producer surplus is the shaded area between the supply curve and the market price. Together consumer and producer surplus measure the welfare benefit of a competitive market. ➢ Welfare effects-Gains and losses caused by government intervention in the market
Price S Deadweight Loss D Po Pma以 E Shortage Q1 Qo Q2 Quantity Change in Consumer and Producer Surplus from Price Controls
Change in Consumer and Producer Surplus from Price Controls B A D E