【文章內(nèi)容簡(jiǎn)介】 ve. Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Summary ?The equilibrium of demand and supply maximizes the sum of consumer and producer surplus. ?This is as if the invisible hand of the marketplace leads buyers and sellers to allocate resources efficiently. ?Markets do not allocate resources efficiently in the presence of market failures. Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Summary ?An allocation of resources that maximizes the sum of consumer and producer surplus is said to be efficient. ?Policymakers are often concerned with the efficiency, as well as the equity, of economic outes. Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Graphical Review Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Measuring Consumer Surplus with the Demand Curve... Price of Album 50 70 80 0 $100 1 2 3 4 Quantity of Albums John’s willingness to pay Paul’s willingness to pay Gee’s willingness to pay Ringo’s willingness to pay Demand Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Measuring Consumer Surplus with the Demand Curve... Price of Album 50 70 80 0 $100 1 2 3 4 Quantity of Albums Demand John’s consumer surplus ($20) Price = $80 Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Measuring Consumer Surplus with the Demand Curve... Price of Album 50 70 80 0 $100 1 2 3 4 Quantity of Albums Demand John’s consumer surplus ($30) Total consumer surplus ($40) Price = $70 Paul’s consumer surplus ($10) How the Price Affects Consumer Surplus... Q2 P2 Quantity Price 0 Demand Copyright 169。 2020 by Harcourt, Inc. All rights reserved Initial consumer surplus Additional consumer surplus to initial consumers Consumer surplus to new consumers Q1 P1 B C A D E F Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Producer Surplus and the Supply Curve... Quantity of Houses Painted Price of House Painting 500 800 $900 0 600 1 2 3 4 Grandma’s cost Geia’s cost Frida’s cost Mary’s cost Supply Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Measuring Producer Surplus with the Supply Curve... Quantity of Houses Painted Price of House Painting 500 800 $900 0 600 1 2 3 4 Supply Grandma’s producer surplus ($100) Price = $600 Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Measuring Producer Surplus with the Supply Curve... Quantity of Houses Painted Price of House Painting 500 800 $900 0 600 1 2 3 4 Supply Grandma’s producer surplus ($300) Price = $800 Geia’s producer surplus ($200) Total producer surplus ($500) Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. How Price Affects Producer Surplus... P2 Q2 Quantity Price 0 Supply Q1 P1 A B C Initial Producer surplus Additional producer surplus to initial producers D E F Producer surplus to new producers Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Evaluating the Market Equilibrium... Price Equilibrium price 0 Quantity Equilibrium quantity A Supply C B Demand D E Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Consumer and Producer Surplus in the Market Equilibrium... Price Equilibrium price 0 Quantity Equilibrium quantity A Supply C B Demand D E Producer surplus Consumer surplus Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Price 0 Quantity Equilibrium quantity Supply Demand Cost to sellers Value to buyers Value to buyers Cost to sellers Value to buyers is greater than cost to sellers. Value to buyers is less than cost to sellers. The Efficiency of the Equilibrium Quantity Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Application: The Costs of Taxation Chapter 8 Copyright 169。 2020 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 328876777. Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. The Costs of Taxation How do taxes affect the economic wellbeing of market participants? Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. The Costs of Taxation It does not matter whether a tax on a good is levied on buyers or sellers of the good…the price paid by buyers rises, and the price received by sellers falls. Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. The Effects of a Tax... Price 0 Quantity Quantity without tax Supply Demand Price without tax Price buyers pay Quantity with tax Size of tax Price sellers receive Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. The Effects of a Tax ?A tax places a wedge between the price buyers pay and the price sellers receive. ?Because of this tax wedge, the quantity sold falls below the level that would be sold without a tax. ?The size of the market for that good shrinks. Harcourt, Inc. items and derived items copyright 169。 2020 by Harcourt, Inc. Tax Revenue T = the size of the tax Q = the quantity of the good sold T?Q = the government’s tax revenu