曼昆经济学 宏观经济学 第五版 教师参考手册 chap07.docx

1、曼昆经济学 宏观经济学 第五版 教师参考手册 chap077CONSUMERS, PRODUCERS, AND EFFICIENCY OF MARKETSWHATS NEW:The FYI box on “Adam Smith and the Invisible Hand” has been moved to Chapter 1.LEARNING OBJECTIVES:By the end of this chapter, students should understand: the link between buyers willingness to pay for a good and

2、the demand curve. how to define and measure consumer surplus. the link between sellers costs of producing a good and the supply curve. how to define and measure producer surplus. that the equilibrium of supply and demand maximizes total surplus in a market.KEY POINTS:1. Consumer surplus equals buyer

3、s willingness to pay for a good minus the amount they actually pay for it, and it measures the benefit buyers get from participating in a market. Consumer surplus can be computed by finding the area below the demand curve and above the price.2. Producer surplus equals the amount sellers receive for

4、their goods minus their costs of production, and it measures the benefit sellers get from participating in a market. Producer surplus can be computed by finding the area below the price and above the supply curve.3. An allocation of resources that maximizes the sum of consumer and producer surplus i

5、s said to be efficient. Policymakers are often concerned with the efficiency, as well as the equity, of economic outcomes.4. The equilibrium of supply and demand maximizes the sum of consumer and producer surplus. That is, the invisible hand of the marketplace leads buyers and sellers to allocate re

6、sources efficiently.5. Markets do not allocate resources efficiently in the presence of market failures such as market power or externalities.CHAPTER OUTLINE:I. Definition of Welfare Economics: the study of how the allocation of resources affects economic well-being.Students often are confused by th

7、e term “welfare economics.” Remind them that we are talking about well-being and not public assistance.II. Consumer SurplusA. Willingness to Pay1. Definition of Willingness to Pay: the maximum amount that a buyer will pay for a good.2. Example: you are auctioning a mint-condition recording of Elvis

8、Presleys first album. Four buyers show up. Their willingness to pay is as follows:Students will understand consumer surplus if you take the time to work through the Elvis Presley example. If you start with this simple example, students will have no trouble understanding how to find consumer surplus

9、on a graph.Table 7-1BuyerWillingness to PayJohn$100Paul80George70Ringo50If the bidding goes to slightly higher than $80, all buyers drop out except for John. Since John is willing to pay more than he has to for the album, he derives some benefit from participating in the market.3. Definition of Cons

10、umer Surplus: a buyers willingness to pay minus the amount the buyer actually pays.4. Note that if you had more than one copy of the album, the price in the auction would end up being lower (a little over $70 in the case of two albums) and both John and Paul would gain consumer surplus.B. Using the

11、Demand Curve to Measure Consumer Surplus1. We can use the information on willingness to pay to derive a demand curve for the rare Elvis Presley album.Table 7-2PriceBuyersQuantity DemandedMore than $100None0$80 to $100John1$70 to $80John, Paul2$50 to $70John, Paul, George3$50 or lessJohn, Paul, Georg

12、e, Ringo4Figure 7-1Price1008070504321Quantity2. At any given quantity, the price given by the demand curve reflects the willingness to pay of the marginal buyer. Because the demand curve shows the buyers willingness to pay, we can use the demand curve to measure consumer surplus.Figure 7-23. Consume

13、r surplus can be measured as the area below the demand curve and above the price.C. How a Lower Price Raises Consumer SurplusFigure 7-31. As price falls, consumer surplus increases for two reasons.a. Those already buying the product will receive additional consumer surplus because they are paying le

14、ss for the product than before (area A on graph).b. Since the price is now lower, some new buyers will enter the market and receive consumer surplus on these additional units of output purchased (area B on graph).PriceP1ABP2DemandQ2Q1QuantityD. What Does Consumer Surplus Measure?It is important to s

15、tress that consumer surplus is measured in monetary terms. Consumer surplus gives us a way to place a monetary cost on inefficient market outcomes (due to government involvement or market failure).1. Remember that consumer surplus is the difference between the amount that buyers are willing to pay f

16、or a good and the price that they actually pay. 2. Thus, it measures the actual benefit that consumers receive from the good above and beyond its cost.ALTERNATIVE CLASSROOM EXAMPLE:Review the material on price ceilings from Chapter 6. Redraw the market for two-bedroom apartments in your town. Draw i

17、n a price ceiling below the equilibrium price. Then go through: consumer surplus before the price ceiling is put in place consumer surplus after the price ceiling is put in placeIII. Producer SurplusA. Cost and the Willingness to Sell1. Definition of Cost: the value of everything a seller must give

18、up to produce a good.You will need to take some time explaining the relationship between the producers willingness to sell and the cost of producing the good. The relationship between cost and the supply curve is not as apparent as the relationship between the demand curve and willingness to pay.2.

19、Example: you want to hire someone to paint your house. There are four sellers from whom you accept bids for the work. Each painter is willing to work if the price you will pay exceeds her opportunity cost. (Note that this opportunity cost thus represents willingness to sell.) The costs are:SellerCos

20、tMary$900Frida800Georgia600Grandma500Table 7-3Bidding will stop when the price gets to be slightly below $600. All sellers will drop out except for Grandma. Since Grandma receives more than she would require to paint the house, she derives some benefit from producing in the market.3. Definition of P

21、roducer Surplus: the amount a seller is paid for a good minus the sellers cost.4. Note that if you had more than one house to paint, the price in the auction would end up being higher (a little under $800 in the case of two houses) and both Grandma and Georgia would gain producer surplus.B. Using th

22、e Supply Curve to Measure Producer Surplus1. We can use the information on cost (willingness to sell) to derive a supply curve for house painting services.Table 7-4PriceSellersQuantity Supplied$900 or moreMary, Frida, Georgia, Grandma4$800 to $900Frida, Georgia, Grandma3$600 to $800Georgia, Grandma2

23、$500 to $600Grandma1less than $500None02. At any given quantity, the price given by the supply curve represents the cost of the marginal seller. Because the supply curve shows the sellers cost (willingness to sell), we can use the supply curve to measure producer surplus.Figure 7-4Price9008006005004

24、321QuantityFigure 7-53. Producer surplus can be measured as the area above the supply curve and below the price.C. How a Higher Price Raises Producer SurplusFigure 7-61. As price rises, producer surplus increases for two reasons.a. Those already selling the product will receive additional producer s

25、urplus because they are receiving more for the product than before (area C on the graph).SupplyP1PriceDCP2Q2Q1Quantityb. Since the price is now higher, some new sellers will enter the market and receive producer surplus on these additional units of output sold (area D on the graph).ALTERNATIVE CLASS

26、ROOM EXAMPLE:Review the material on price floors from Chapter 6. Redraw the market for an agricultural product such as corn. Draw in a price support above the equilibrium price. Then go through: producer surplus before the price support is put in place. producer surplus after the price support is pu

27、t in place.D. Producer surplus is used to measure economic well-being of producers, much like consumer surplus is used to measure the economic well-being of consumers.IV. Market EfficiencyA. The Benevolent Social Planner1. The economic well-being of everyone in society can be measured by total surpl

28、us, which is the sum of consumer surplus and producer surplus:Total Surplus = Consumer Surplus + Producer SurplusTotal Surplus = (Value to Buyers - Amount Paid by Buyers) + (Amount Received by Sellers - Costs of Sellers)Because the Amount Paid By Buyers = Amount Received By Sellers:2. Definition of

29、Efficiency: the property of a resource allocation of maximizing the total surplus received by all members of society.3. Definition of Equity: the fairness of the distribution of well-being among the members of society.Now might be a good time to point out that many government policies involve a trad

30、eoff between efficiency and equity. Then, when you evaluate government policies, like price ceilings or floors, you can explain them in terms of equity and efficiency.B. Evaluating the Market EquilibriumFigure 7-7SupplyPriceCSP*PSDemandQ*Quantity1. At the market equilibrium price:a. Buyers who value

31、 the product more than the equilibrium price will purchase the product; those who do not will not purchase the product.b. Sellers whose costs are less than the equilibrium price will produce the product; those whose costs are higher will not produce the product.2. Total surplus is maximized at the market equilibrium.Figure 7-8SupplyPriceValue to BuyersCost to Sellers