The effect of change in the elasticity of demand on social surplus.

Question

Want to see more full solutions like this?

Answer 1

Question

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.

Chapter 7, Problem 1Q

To determine

The effect of change in the elasticity of demand on social surplus.

Expert Solution & Answer

Explanation of Solution

The Elasticity of demand states the sensitivity of change in quantity demanded due to a change in price. Consumer surplus refers to the difference between the price that consumer is willing to pay and price that they actually pay. Producer surplus refers to the difference between the price at which a producer is willing to supply and the price they actually receive.

Social surplus is the sum total of both consumer surplus and the producer surplus. The effect of elasticity can be seen in the below diagram.

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 1

In part (a) of the above diagram, DD is the demand and elastic demand curve, SS is the supply curve, and the equilibrium price is where DD and SS intersect. The consumer surplus is area between the demand curve and above the market price. As the elasticity of demand increases, consumer surplus also increases as shown in part ( b ) of the diagram.

So, if the elasticity of demand is higher, consumer surplus will be lower as what a consumer is willing to pay becomes equal to what they actually pay.

Thus, the social surplus will also be lower as it consists of consumer surplus.

Similarly,

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 2

DD is the demand curve, SS is the elastic supply curve and the equilibrium price is where DD and SS intersect. Producer surplus is calculated between the price and above the supply curve, which means the higher the elasticity of supply, the lower is the producer surplus which will decrease social surplus. As the elasticity of supply increases, producer surplus also increases as shown in part ( b ) of the diagram, which will increase social surplus.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

4. The table below shows the labor requirements for Mr. and Mrs. Howell for pineapples and coconuts. Which is the most accurate statement? A. Mrs. Howell has a comparative advantage in coconuts and the opportunity cost of 1 coconut for Mrs. Howell is 4 pineapples B. Mrs. Howell has a comparative advantage in pineapples and the opportunity cost of 1 pineapple for Mrs. Howell is .25 coconuts. C. Mr. Howell has a comparative advantage in pineapples and the opportunity cost of 1 pineapple is 1 coconut. D. Mr. Howell has a comparative advantage in both pineapples and coconuts and should specialize in pineapples. Labor Requirements for Pineapples and Coconuts 1 Pineapple 1 Coconut Mr. Howell 1 hour 1 hour Mrs. Howell 1/2 hour 2 hours

4. Supply and Demand. The table gives hypothetical data for the quantity of electric scooters demanded and supplied per month. Price per Electric Scooter Quantity Quantity Demanded Supplied $150 500 250 $175 475 350 $200 450 450 $225 425 550 $250 400 650 $275 375 750 a. Graph the demand and supply curves. Note if you prefer to hand draw separately, you may and insert the picture separately. Price per Scooter 300 275 250 225 200 175 150 250 400 375425475 350 450 550 650 750 500 850 Quantity b. Find the equilibrium price and quantity using the graph above. c. Illustrate on your graph how an increase in the wage rate paid to scooter assemblers would affect the market for electric scooters. Label any new lines in the same graph above to distinguish changes. d. What would happen if there was an increase in the wage rate paid to scooter assemblers at the same time that tastes for electric scooters increased? 1ང

3. Production Costs Clean 'n' Shine is a competitor to Spotless Car Wash. Like Spotless, it must pay $150 per day for each automated line it uses. But Clean 'n' Shine has been able to tap into a lower-cost pool of labor, paying its workers only $100 per day. Clean 'n' Shine's production technology is given in the following table. To determine its short-run cost structure, fill in the blanks in the table. Fill in the columns below. Outpu Capita Labor TFC TVC TC MC AFC AVC ATC 1 0 30 1 1 70 1 2 120 1 3 160 1 4 190 1 5 210 1 6 a. Over what range of output does Clean 'n' Shine experience increasing marginal returns to labor? Over what range does it experience diminishing marginal returns to labor? (*answer both questions) b. As output increases, do average fixed costs behave as described in the text? Explain. C. As output increases, do marginal cost, average variable cost, and average total cost behave as described in the text? Explain. d. Looking at the numbers in the table, but without…

Answer 2

Question

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.

Chapter 7, Problem 1Q

To determine

The effect of change in the elasticity of demand on social surplus.

Expert Solution & Answer

Explanation of Solution

The Elasticity of demand states the sensitivity of change in quantity demanded due to a change in price. Consumer surplus refers to the difference between the price that consumer is willing to pay and price that they actually pay. Producer surplus refers to the difference between the price at which a producer is willing to supply and the price they actually receive.

Social surplus is the sum total of both consumer surplus and the producer surplus. The effect of elasticity can be seen in the below diagram.

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 1

In part (a) of the above diagram, DD is the demand and elastic demand curve, SS is the supply curve, and the equilibrium price is where DD and SS intersect. The consumer surplus is area between the demand curve and above the market price. As the elasticity of demand increases, consumer surplus also increases as shown in part ( b ) of the diagram.

So, if the elasticity of demand is higher, consumer surplus will be lower as what a consumer is willing to pay becomes equal to what they actually pay.

Thus, the social surplus will also be lower as it consists of consumer surplus.

Similarly,

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 2

DD is the demand curve, SS is the elastic supply curve and the equilibrium price is where DD and SS intersect. Producer surplus is calculated between the price and above the supply curve, which means the higher the elasticity of supply, the lower is the producer surplus which will decrease social surplus. As the elasticity of supply increases, producer surplus also increases as shown in part ( b ) of the diagram, which will increase social surplus.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

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.

Chapter 7, Problem 1Q

To determine

The effect of change in the elasticity of demand on social surplus.

Expert Solution & Answer

Explanation of Solution

The Elasticity of demand states the sensitivity of change in quantity demanded due to a change in price. Consumer surplus refers to the difference between the price that consumer is willing to pay and price that they actually pay. Producer surplus refers to the difference between the price at which a producer is willing to supply and the price they actually receive.

Social surplus is the sum total of both consumer surplus and the producer surplus. The effect of elasticity can be seen in the below diagram.

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 1

In part (a) of the above diagram, DD is the demand and elastic demand curve, SS is the supply curve, and the equilibrium price is where DD and SS intersect. The consumer surplus is area between the demand curve and above the market price. As the elasticity of demand increases, consumer surplus also increases as shown in part ( b ) of the diagram.

So, if the elasticity of demand is higher, consumer surplus will be lower as what a consumer is willing to pay becomes equal to what they actually pay.

Thus, the social surplus will also be lower as it consists of consumer surplus.

Similarly,

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 2

DD is the demand curve, SS is the elastic supply curve and the equilibrium price is where DD and SS intersect. Producer surplus is calculated between the price and above the supply curve, which means the higher the elasticity of supply, the lower is the producer surplus which will decrease social surplus. As the elasticity of supply increases, producer surplus also increases as shown in part ( b ) of the diagram, which will increase social surplus.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

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.

Chapter 7, Problem 1Q

To determine

The effect of change in the elasticity of demand on social surplus.

Expert Solution & Answer

Explanation of Solution

The Elasticity of demand states the sensitivity of change in quantity demanded due to a change in price. Consumer surplus refers to the difference between the price that consumer is willing to pay and price that they actually pay. Producer surplus refers to the difference between the price at which a producer is willing to supply and the price they actually receive.

Social surplus is the sum total of both consumer surplus and the producer surplus. The effect of elasticity can be seen in the below diagram.

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 1

In part (a) of the above diagram, DD is the demand and elastic demand curve, SS is the supply curve, and the equilibrium price is where DD and SS intersect. The consumer surplus is area between the demand curve and above the market price. As the elasticity of demand increases, consumer surplus also increases as shown in part ( b ) of the diagram.

So, if the elasticity of demand is higher, consumer surplus will be lower as what a consumer is willing to pay becomes equal to what they actually pay.

Thus, the social surplus will also be lower as it consists of consumer surplus.

Similarly,

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 2

DD is the demand curve, SS is the elastic supply curve and the equilibrium price is where DD and SS intersect. Producer surplus is calculated between the price and above the supply curve, which means the higher the elasticity of supply, the lower is the producer surplus which will decrease social surplus. As the elasticity of supply increases, producer surplus also increases as shown in part ( b ) of the diagram, which will increase social surplus.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 1Q

To determine

The effect of change in the elasticity of demand on social surplus.

Expert Solution & Answer

Explanation of Solution

The Elasticity of demand states the sensitivity of change in quantity demanded due to a change in price. Consumer surplus refers to the difference between the price that consumer is willing to pay and price that they actually pay. Producer surplus refers to the difference between the price at which a producer is willing to supply and the price they actually receive.

Social surplus is the sum total of both consumer surplus and the producer surplus. The effect of elasticity can be seen in the below diagram.

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 1

In part (a) of the above diagram, DD is the demand and elastic demand curve, SS is the supply curve, and the equilibrium price is where DD and SS intersect. The consumer surplus is area between the demand curve and above the market price. As the elasticity of demand increases, consumer surplus also increases as shown in part ( b ) of the diagram.

So, if the elasticity of demand is higher, consumer surplus will be lower as what a consumer is willing to pay becomes equal to what they actually pay.

Thus, the social surplus will also be lower as it consists of consumer surplus.

Similarly,

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 2

DD is the demand curve, SS is the elastic supply curve and the equilibrium price is where DD and SS intersect. Producer surplus is calculated between the price and above the supply curve, which means the higher the elasticity of supply, the lower is the producer surplus which will decrease social surplus. As the elasticity of supply increases, producer surplus also increases as shown in part ( b ) of the diagram, which will increase social surplus.

Answer 6

Chapter 7, Problem 1Q

To determine

The effect of change in the elasticity of demand on social surplus.

Expert Solution & Answer

Explanation of Solution

The Elasticity of demand states the sensitivity of change in quantity demanded due to a change in price. Consumer surplus refers to the difference between the price that consumer is willing to pay and price that they actually pay. Producer surplus refers to the difference between the price at which a producer is willing to supply and the price they actually receive.

Social surplus is the sum total of both consumer surplus and the producer surplus. The effect of elasticity can be seen in the below diagram.

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 1

In part (a) of the above diagram, DD is the demand and elastic demand curve, SS is the supply curve, and the equilibrium price is where DD and SS intersect. The consumer surplus is area between the demand curve and above the market price. As the elasticity of demand increases, consumer surplus also increases as shown in part ( b ) of the diagram.

So, if the elasticity of demand is higher, consumer surplus will be lower as what a consumer is willing to pay becomes equal to what they actually pay.

Thus, the social surplus will also be lower as it consists of consumer surplus.

Similarly,

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 2

DD is the demand curve, SS is the elastic supply curve and the equilibrium price is where DD and SS intersect. Producer surplus is calculated between the price and above the supply curve, which means the higher the elasticity of supply, the lower is the producer surplus which will decrease social surplus. As the elasticity of supply increases, producer surplus also increases as shown in part ( b ) of the diagram, which will increase social surplus.

Answer 7

Chapter 7, Problem 1Q

To determine

The effect of change in the elasticity of demand on social surplus.

Answer 8

Expert Solution & Answer

Explanation of Solution

The Elasticity of demand states the sensitivity of change in quantity demanded due to a change in price. Consumer surplus refers to the difference between the price that consumer is willing to pay and price that they actually pay. Producer surplus refers to the difference between the price at which a producer is willing to supply and the price they actually receive.

Social surplus is the sum total of both consumer surplus and the producer surplus. The effect of elasticity can be seen in the below diagram.

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 1

In part (a) of the above diagram, DD is the demand and elastic demand curve, SS is the supply curve, and the equilibrium price is where DD and SS intersect. The consumer surplus is area between the demand curve and above the market price. As the elasticity of demand increases, consumer surplus also increases as shown in part ( b ) of the diagram.

So, if the elasticity of demand is higher, consumer surplus will be lower as what a consumer is willing to pay becomes equal to what they actually pay.

Thus, the social surplus will also be lower as it consists of consumer surplus.

Similarly,

Microeconomics (2nd Edition) (Pearson Series in Economics), Chapter 7, Problem 1Q , additional homework tip 2

DD is the demand curve, SS is the elastic supply curve and the equilibrium price is where DD and SS intersect. Producer surplus is calculated between the price and above the supply curve, which means the higher the elasticity of supply, the lower is the producer surplus which will decrease social surplus. As the elasticity of supply increases, producer surplus also increases as shown in part ( b ) of the diagram, which will increase social surplus.