Lectures in Microeconomics-Charles W. Upton More on Consumer Surplus 0 2 4 6 8 10 12 14 16 18 20 T ripsper Y ear 1 hour 2 hours 3 hours 4 hours
Lectures in Microeconomics-Charles W. Upton More on Consumer Surplus.
Dec 19, 2015
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Lectures in Microeconomics-Charles W. Upton
More on Consumer Surplus
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More on Consumer Surplus
More on Consumer Surplus
• The Concept of Consumer Surplus is quite powerful.
More on Consumer Surplus
More on Consumer Surplus
• The Concept of Consumer Surplus is quite powerful.
• I want to show some applications of this concept.
More on Consumer Surplus
Valuing the Benefit of a Project
• The Government builds a new dam, creating a new lake. What are the recreational benefits from this lake?
• We can analyze this with consumer surplus
More on Consumer Surplus
Valuing the Benefit of a Project
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More on Consumer Surplus
Valuing the Benefit of a Project
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$10 $20 $30 $40
More on Consumer Surplus
Valuing the Benefit of a Project
$0
$5
$10
$15
$20
$25
$30
$35
$40
5 10 15 20
More on Consumer Surplus
Valuing the Benefit of a Project
$0
$5
$10
$15
$20
$25
$30
$35
$40
5 10 15 20
More on Consumer Surplus
Valuing the Benefit of a Project
$0
$5
$10
$15
$20
$25
$30
$35
$40
5 10 15 20
More on Consumer Surplus
The Benefit
40
25
More on Consumer Surplus
The Benefit
40
25
500)40)(25(2
1
2
1 BHCS
More on Consumer Surplus
A Simple Application
• Demand for a swimming pool:V =300,000 - 30,000p
More on Consumer Surplus
A Simple Application
• Demand for a swimming pool:V =300,000 - 30,000p
• Current capacity is 200,000
More on Consumer Surplus
A Simple Application
• Demand for a swimming pool:V =300,000 - 30,000p
• Current capacity is 200,000• What Price Restricts Demand?
More on Consumer Surplus
A Simple Application
• Demand for a swimming pool:V =300,000 - 30,000p
• Current capacity is 200,000• What Price Restricts Demand?
200,000=300,000-30,000p
p=$3.33
More on Consumer Surplus
A Simple Application
• Demand for a swimming pool:V =300,000 - 30,000p
• Current capacity is 300,000• What Price Restricts Demand?• Should it be expanded to
300,000?
More on Consumer Surplus
A Simple Application
V = 300,000-30,000p
$10
300,000
More on Consumer Surplus
A Simple Application
V = 300,000-30,000p
$10
300,000
More on Consumer Surplus
A Simple Application
V = 300,000-30,000p
$10
300,000
$3.33
200,000
More on Consumer Surplus
A Simple Application
V = 300,000-30,000p
$10
300,000
$3.33
200,000
667,166$)33.3)($000,100(2
1
2
1 BHGain
More on Consumer Surplus
A Simple Application
V = 300,000-30,000p
$10
300,000
$3.33
200,000
667,166$)33.3)($000,100(2
1
2
1 BHGain
So what are the Costs?
More on Consumer Surplus
A Simple Application
V = 300,000-30,000p
$10
300,000
$3.33
200,000
667,166$)33.3)($000,100(2
1
2
1 BHGain
So what are the Costs?
If C<$166,667 Expand
If C> $166,667 Don’t
More on Consumer Surplus
End
©2004 Charles W. Upton
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