Sellers: - Each seller has one unit of a hypothetical good -sellers face a cost of production for each unit of good; this cost will be determined from a randomly picked card - the associated cost for each seller is her/his "willingness to accept" (WTA) price for trade: sellers want to sell the good as high as possible, at least higher than or equal to the cost - seller earning is calculated by = price of negotiated trade - assigned cost (on the card) Buyers: - each buyer wants to buy at most one unit of the hypothetical good from a seller -each buyer has a value in her/his mind. saying how much this good worth for her/him -the value is the buyer's "willingness to pay": buyer seek for the lowest price possible market and the price must be smaller or equal to the buyers' value. This value is determined by a randomly picked card - seller earning is calculated by = assigning value of the good - price of negotiated trade The pool of available card is as follows: Black for buyers (spades or clubs): 2, 2, 3, 4, 5, 6, 6, 7, 8 Red for sellers (heards/diamonds): 10,10,9,8,7,6,6,5,4 Thus there are 9 goods available to 9 sellers with above production costs. PROBLEM QUESTION: Find the consumer, producer and total surplus measure for the market equilibrium problem.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Sellers: - Each seller has one unit of a hypothetical good -sellers face a cost of production for each unit of good; this cost will be determined from a randomly picked card - the associated cost for each seller is her/his "willingness to accept" (WTA) price for trade: sellers want to sell the good as high as possible, at least higher than or equal to the cost - seller earning is calculated by = price of negotiated trade - assigned cost (on the card) Buyers: - each buyer wants to buy at most one unit of the hypothetical good from a seller -each buyer has a value in her/his mind. saying how much this good worth for her/him -the value is the buyer's "willingness to pay": buyer seek for the lowest price possible market and the price must be smaller or equal to the buyers' value. This value is determined by a randomly picked card - seller earning is calculated by = assigning value of the good - price of negotiated trade The pool of available card is as follows: Black for buyers (spades or clubs): 2, 2, 3, 4, 5, 6, 6, 7, 8 Red for sellers (heards/diamonds): 10,10,9,8,7,6,6,5,4 Thus there are 9 goods available to 9 sellers with above production costs. PROBLEM QUESTION: Find the consumer, producer and total surplus measure for the market equilibrium problem.

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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