Lecture 11. Equilibrium, Welfare Policy 范里安版《中级微观经济学》ppt讲解材料.pptVIP

?CS, CV EV:A Cobb-Douglas Example If m1=100, p1=p2=1, a=b=1/2, p’1=2, Then And And * Suppose that the consumer has a quasi-linear utility function v(x1) + x2. The original prices are (p*1, p*2), and original income is m1. If the price of good 1 increases from p*1 to p**1, what are the compensating and equivalent variations? ?CS, CV EV EXAMPLES Quasi-linear Preferences * Producer’s Surplus y, (output units) p, (Output price) Marginal Cost x*1 p*1 Revenue Variable Cost Producer’s Surplus * Producer’s Surplus and Profits p, (Output price) AVCs(y) ACs(y) MCs(y) y, (output units) p y*(p) PS Profits * Profits are less than Producer’s Surplus ? The firm’s producer’s surplus is The firm’s profits is Only if fixed cost is zero (in the long-run) are PS and profit the same. Producer’s Surplus and Profits * Welfare Effects: Gains and losses caused by government intervention in the market. Economic efficiency: Maximization of aggregate consumer and producer surplus. Generally, government intervention in a competitive market will change the quantity traded, create a deadweight loss and reduce efficiency. Gains and Losses fromGovernment Policies * Consider the agricultural policies. Generally, prices of the farm produces are quite low. So, the government tries to rise the price of the market. There are three policies that could be chosen: Price control Supply restrictions Price supports Government Policies * Government Policy:Price Controls * The gain to producers is the difference between A and C. C B A The loss to consumers is the sum of A and B. Quantity Price S D P0 Q0 Pmin Q1 Q2 Suppose the government imposes a price floor Pmin (PminP0). Deadweight Loss B and C together measure the deadweight loss. Government Policy:Supply Restrictions * Quantity Price S D P0 Q0 S’ Pmin Q1 Q2 Supply restricted to Q1 Supply shifts to S’ at Q1 B A The loss to consumers is A+B, and the gain to producers is A?C. C If Pmin is maintained with an incentive, cost to governm