Chapter Fourteen Consumer's Surplus 消费者剩余
Chapter Fourteen Consumer’s Surplus 消费者剩余
Structure Money equivalent of utility gains to trade ◆ Consumers surp|Us Changes in consumer's surplus 4 Compensating and equivalent variations ◆ Producer' s surplus
Structure ◆Money equivalent of utility gains to trade ◆Consumer’s surplus ◆Changes in consumer’s surplus ◆Compensating and equivalent variations ◆Producer’s surplus
Monetary measures of Gains-to T rade You can buy as much gasoline as you wish at $1 per gallon once you enter the gasoline market Q: What is the most you would pay to enter the market? A: You would pay up to the dollar value of the gains-to-trade you would enjoy once in the market
Monetary Measures of Gains-toTrade ◆You can buy as much gasoline as you wish at $1 per gallon once you enter the gasoline market. ◆Q: What is the most you would pay to enter the market? ◆A: You would pay up to the dollar value of the gains-to-trade you would enjoy once in the market
Monetary Measures of Gains-to Trade e How can such gains-to-trade be measured? e Three such measures are: ● Consumer' s Surplus ● Equivalent variation(等价变换),and Compensating Variation(补偿变换) Only in one special circumstance do these three measures coincide
◆ How can such gains-to-trade be measured? ◆ Three such measures are: ⚫Consumer’s Surplus ⚫Equivalent Variation （等价变换）, and ⚫Compensating Variation （补偿变换）. ◆ Only in one special circumstance do these three measures coincide. Monetary Measures of Gains-toTrade
S Equivalent Utility gains e Use r to denote the most a consumer would pay for a 1st gallon -reservation price(保留价格) for the1 st gallon ◆r1 is the dollar equiⅳ alent of the marginal utility of the 1st gallon use r2 to denote the most she would pay for a 2nd gallon -this is her reservation price for the 2nd gallon r2 is the dollar equivalent of the marginal utility of the 2nd gallon
◆ Use r1 to denote the most a consumer would pay for a 1st gallon -- reservation price （保留价格）for the 1st gallon. ◆ r1 is the dollar equivalent of the marginal utility of the 1st gallon. ◆ use r2 to denote the most she would pay for a 2nd gallon -- this is her reservation price for the 2nd gallon. ◆ r2 is the dollar equivalent of the marginal utility of the 2nd gallon. $ Equivalent Utility Gains
S Equivalent Utility gains Generally, if she already has n-1 gallons of gasoline then rn denotes the most she will pay for an nth gallon. n is the dollar equivalent of the marginal utility of the nth gallon
◆Generally, if she already has n-1 gallons of gasoline then rn denotes the most she will pay for an nth gallon. ◆rn is the dollar equivalent of the marginal utility of the nth gallon. $ Equivalent Utility Gains
S Equivalent Utility gains ◆r1+…+ r will be the dollar equivalent of the total change to utility from consuming n gallons of gasoline at a price of $o. ◆Sor1+…….+rn- pgn will be the dollar equivalent of the total change to utility from consuming n gallons of gasoline at a price of spG each
◆r1 + … + rn will be the dollar equivalent of the total change to utility from consuming n gallons of gasoline at a price of $0. ◆So r1 + … + rn - pGn will be the dollar equivalent of the total change to utility from consuming n gallons of gasoline at a price of $pG each. $ Equivalent Utility Gains
S Equivalent Utility gains (s)Res Reservation Price Curve for gasoline Values 5 6 23456 Gasoline(gallons)
$ Equivalent Utility Gains Reservation Price Curve for Gasoline 0 2 4 6 8 10 Gasoline (gallons) ($) Res. Values 1 2 3 4 5 6 r1 r2 r3 r4 r5 r6
S Equivalent Utility gains What is the monetary value of our consumer's gain-to-trading in the gasoline market at a price of SpG?
◆What is the monetary value of our consumer’s gain-to-trading in the gasoline market at a price of $pG? $ Equivalent Utility Gains
S Equivalent Utility gains The dollar equivalent net utility gain for the 1st gallon is S( - pG) and is $(r2-p) for the 2nd gallon, c and so on so the dollar value of the gain-to-trade is $(r1-po)+$(r2-po)+ for as long as rn -pG>0
◆The dollar equivalent net utility gain for the 1st gallon is $(r1 - pG) ◆and is $(r2 - pG) for the 2nd gallon, ◆and so on, so the dollar value of the gain-to-trade is $(r1 - pG) + $(r2 - pG) + … for as long as rn - pG > 0. $ Equivalent Utility Gains