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PENN STATE ABINGTON / Economics / ECON 102 / What are examples of consumer max utility?

What are examples of consumer max utility?

What are examples of consumer max utility?

Description

School: Penn State Abington
Department: Economics
Course: Introductory Microeconomic Analysis and Policy
Professor: Lisa delgado
Term: Spring 2016
Tags: Econ, Economics, and Microeconomics
Cost: 25
Name: Econ 102, Week 5 Notes
Description: Utility, marginal benefit, marginal cost, marginal decision rule, maximizing in the market place, achieving efficiency, consumer and producer surplus, market failure
Uploaded: 05/01/2016
4 Pages 164 Views 0 Unlocks
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ECON: 102We also discuss several other topics like What are the influences of structuralism?

Chapter: 5 Market Maximizer

Consumer max utility = happiness and satisfactionIf you want to learn more check out ddadad

Producers max profit = TR- TC

                (Total Revenue - Total Cost)

If you want to learn more check out What are the ways to improve earnings?

All economic agents max net benefit = TB - TC

                (Total Benefit - Total Cost)We also discuss several other topics like What was the outcome of Robber's Cave study?

Marginal Benefit (MB) =

Marginal Cost (MC) =

We also discuss several other topics like What does attitude consistency mean?

Marginal Decision Rule:

        If MB > MC ⇒        ↑ QIf you want to learn more check out What differentiates direct democracy from a republic?

        If MB < MC ⇒        ↓ Q

        If MB = MC ⇒ Q stays same ⇒ max net benefit

Ex.        Hours (econ)                TB(econ)                MB(econ)

        0                        0                        

        1                        18                        

        2                        32                        

        3                        42                        

        4                        48                        

        5                        50                        

Ex.         Hours (econ)                TB(econ)                MB(econ)

        5                        32                        

4                        32                        

3                        30                        

2                        24                        

1                        14                        

0                        0

Maximizing in the Marketplace:

Efficient allocation of resources: refers to allocation of scarce resources when the net benefits of all economic activities are maximized

Efficiency condition

        1) Competitive market

        2) Well-defined and transferable property rights

Achieving Efficiency:

Property rights are a set of rules that specify ways in which an owner can cause and resource.

Exclusive property right is a property right that allows its owner to prevent others from using the source.

Transferable property right is a property right

Consumer and Producer Surplus: (net benefit= CS+PS)

CS: amount by which total benefits to consumers from consuming a good exceed their total expenditures on the good.

PS: difference between TR received by sellers and their TC.

Market Failure: occurs when private decision makers in the market achieve an efficient allocation of scarce resources.

Microeconomics Analysis

Lisa Delgado, PH.D.

1. Rich has the following benefit and cost schedule for coaching each week.

Quantity

(hours per week)

Total Benefit

Marginal

Benefit

Total cost

Marginal Cost

0

0

0

40

10

2

80

20

30

20

4

140

60

20

30

6

180

120

10

40

8

200

200

  1. Compute the Marginal Benefit and Marginal Cost in the above table.
  2. According to the marginal decision rule, at 6 hours per week, should Rich coach more hours or less hours?

Do less hours.

  1. What is the efficient allocation for Rich? Explain why this is considered his efficient allocation.

        4 hours, that is where the max net benefit is.

2. The following table shows the market schedule for the iPod Touch.

                        D                S

        Price                Marginal        Marginal         Elasticity of supply

(Dollars)        Benefit                Cost

        0                1,000                0

        100                750                250

        300                250                750

        400                0                1,000

  1. Plot the points and draw the demand and supply curves.

  1. What is the maximum price that consumers are willing to pay for the 750th iPod Touch?

        $300

  1. What is the minimum price that producers are willing to accept for the 750th iPod Touch?

$300

  1. What is the efficient quantity bought and sold in the iPod Touch market?

        500

  1. Explain why the efficient quantity is considered the most efficient point for the market?

                Because it is the max net benefit

                Max CS+PS; and MC=MC

  1. On the graph above, label the areas of consumer and producer surplus if the iPod Touch market is efficient.

        CS = below demand and above equilibrium price

        PS = above supply and below equilibrium price

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