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Copyright © 2011 Cengage Learning
77Consumers, Producers, and the
Efficiency of Markets
Table 1 Four Possible Buyers’ Willingness to Pay
Copyright © 2011 Cengage Learning
Copyright © 2010 Cengage Learning
Figure 1 The Demand Schedule and the Demand Curve (1)
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Figure 1 The Demand Schedule and the Demand Curve (2)
Price ofalbum
0 Quantity ofalbums
Demand
1 2 3 4
€100 Liam’s willingness to pay
80 Paul’s willingness to pay
70 Noel ’s willingness to pay
50 Tony ’s willingness to pay
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Figure 2 Measuring Consumer Surplus with the Demand Curve (1)
(a) Price = €80
Price ofalbum
50
70
80
0
€100
Demand
1 2 3 4 Quantity ofalbums
Liam’s consumer surplus (€20)
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Figure 2 Measuring Consumer Surplus with the Demand Curve (2)
(b) Price = €70Price of
album
50
70
80
0
€100
Demand
1 2 3 4
Totalconsumersurplus (€40)
Quantity ofalbums
Liam’s consumer surplus (€30)
Paul’s consumersurplus (€10)
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Figure 3 How the Price Affects Consumer Surplus (1)
Consumersurplus
Quantity
(a) Consumer surplus at price P
Price
0
Demand
P1
Q1
B
A
C
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Figure 3 How the Price Affects Consumer Surplus (2)
Initialconsumer
surplus
Quantity
(b) Consumer surplus at price P
Price
0
Demand
A
BC
D EF
P1
Q1
P2
Q2
Consumer surplusto new consumers
Additional consumersurplus to initial consumers
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Table 2 The Costs of Four Possible Sellers
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Copyright © 2010 Cengage Learning
Figure 4 The Supply Schedule and the Supply Curve (1)
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Figure 4 The Supply Schedule and the Supply Curve (2)
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Figure 5 Measuring Producer Surplus with the Supply Curve (1)
Quantity ofhouses painted
Price ofhouse
painting
500
800
€900
0
600
1 2 3 4
(a) Price = €600
Supply
’Nana’s producersurplus (€100)
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Figure 5 Measuring Producer Surplus with the Supply Curve (2)
Quantity ofhouses painted
Price ofhouse
painting
500
800
€900
0
600
1 2 3 4
(b) Price = €800
Georgia’s producersurplus (€200)
Totalproducersurplus (€500)
’Nana’s producersurplus (€300)
Supply
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Figure 6 How the Price Affects Producer Surplus (1)
Producersurplus
Quantity
(a) Producer surplus at price P
Price
0
Supply
B
A
C
Q1
P1
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Figure 6 How the Price Affects Producer Surplus (2)
Quantity
(b) Producer surplus at price P
Price
0
P1B
C
Supply
A
Initialproducersurplus
Q1
P2
Q2
Producer surplusto new producers
Additional producersurplus to initialproducers
D EF
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Copyright © 2010 Cengage Learning
Figure 7 The Effect of a Subsidy on the Price of Gasoline
Figure 8 Consumer and Producer Surplus in the Market Equilibrium
Producersurplus
Consumersurplus
Price
0 Quantity
Equilibriumprice
Equilibriumquantity
Supply
Demand
A
C
B
D
E
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Figure 9 The Efficiency of the Equilibrium Quantity
Quantity
Price
0
Supply
Demand
Costto
sellers
Costto
sellers
Valueto
buyers
Valueto
buyers
Value to buyers is greaterthan cost to sellers.
Value to buyers is lessthan cost to sellers.
Equilibriumquantity
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