Chapter 9Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedChapter 9Applying the Competitive ModelJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved Figure 9.01a Consumer Surplus54321543210CS2 = $1CS1 = $2E1 = $3 E2 = $3 E3 = $3Price = $3abcq, Magazines per weekp, $ per magazine(a) David ’s Consumer SurplusDemandJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved Figure 9.01b Consumer Surplusp1p, $ pertrading cardq1q, Trading cards per yearDemandExpenditure, EConsumersurplus, CSMarginal willingness topay for the last unit of output(b) Steven’s Consumer SurplusJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.02 Fall in Consumer Surplus from Roses as Price Risesp, ¢ per stemQ, Billion rose stems per year57.832301.160 1.25baA = $149.64 millionB = $23.2 millionC = $0.9 millionDemandJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved Table 9.01 Effect of a 10% Increase in Price on Consumer Surplus (Revenue and Consumer Surplus in Billions of 1999 Dollars)Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 9.1 p, $ per unitQ, Units per weekQ1Q3Q2p1p2 e1e2e3DCBARelatively inelastic demand (at e1)Relatively elastic demand (at e1)Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.03a Producer Surplus432143210PS2 = $2 PS3 = $1PS1 = $3MC2 = $2 MC3 = $3 MC4 = $4MC1 = $1pSupplyq, Units per weekp, $ per unit(a) A Firm ’s Producer SurplusJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.03b Producer Surplusp*p, Price per unitQ*Market supply curveQ, Units per yearMarket priceVariable cost, VCProducer surplus, PS(b) A Market ’s Producer SurplusJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 9.2 p, ¢ per stemQ, Billion rose stems per yearE = $4.05 million30210 1.16 1.25SupplybaD = $104.4 millionFJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.04 Why Reducing Output from the Competitive Level Lowers Welfarep, $ per unitQ, Units per yearSupplyDemandp2MC1 = p1Q2Q1e1MC2e2CEBDAFJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.05 Why Increasing Output from the Competitive Level Lowers Welfarep, $ per unitQ, Units per yearSupplyDemandp2MC1 = p1Q2Q1e1MC2e2CFBDEAG HJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.06 Effect of a Restriction on the Number of Cabsp, $ per ride(a) Cab Firmq2q1q, Rides per monthE1DS1S2E2BACAC2AC1MCe2e1p2p1p2p1p, $ per ride(b) Marketn2q1Q2 = n2q2Q1 = n11Q, Rides per monthqJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.07 Welfare Effects of a Specific Tax on Rosesp, ¢ per stemQ, Billion rose stems per year210 = 111.16 1.25e1e2DSupplyDemandCEBAF3230Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.08 Effect of Price Supports in Soybeansp, $ per bushelQd = 1.9Q1 = 2.1GDQs = 2.20Q, Billion bushels of soybeans per yearQg = 0.3p1 = 4.593.60SupplyDemandPrice supporteFBMCACEp = 5.00Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 9.3 Qd = 1.90 Q1 = 2.1G1G2D1D2Q2 = 2.2Q, Billion bushels of soybeans per yearQ g = 0.3p1 = 4.59Price supporteFBACEQ*g = 0.2p = 5.00Q, QuotaSupplyDemandp, $ per bushelJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 9.4 p, $ per poundQ, Pounds per yearp1p2Qs = Q2Qd Q1e1e2Dp, Price ceilingCEBAFSupplyDemandJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.09 Loss from Eliminating Free Tradep, 1988 dollarsper barrel9.0 10.28.2 11.8 13.1Q, Million barrels of oil per dayImports = 4.914.70029.04Sa = S2S1, World pricee2e1DBACDemandJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 9.10 Effect of a Tariff (or Quota)p, 1988 dollarsper barrel9.08.2 11.8 13.1Q, Million barrels of oil per dayImports = 2.8014.7019.7029.04Sa=S2S3DemandS1, World pricee2e3e1 = 5.00FG HBAC EDJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 9.02 Welfare Cost of Trade Barriers (millions of 1999
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