nicholson微观经济理论（答案+PPT+习题库）-ch11.pptVIP

Chapter 11 APPLIED COMPETITIVE ANALYSIS Economic Efficiency and Welfare Analysis The area between the demand and the supply curve represents the sum of consumer and producer surplus measures the total additional value obtained by market participants by being able to make market transactions This area is maximized at the competitive market equilibrium Economic Efficiency and Welfare Analysis Economic Efficiency and Welfare Analysis Economic Efficiency and Welfare Analysis Mathematically, we wish to maximize consumer surplus + producer surplus = Economic Efficiency and Welfare Analysis Maximizing total surplus with respect to Q yields U’(Q) = P(Q) = AC = MC maximization occurs where the marginal value of Q to the representative consumer is equal to market price the market equilibrium Welfare Loss Computations Use of consumer and producer surplus notions makes possible the explicit calculation of welfare losses caused by restrictions on voluntary transactions in the case of linear demand and supply curves, the calculation is simple because the areas of loss are often triangular Welfare Loss Computations Suppose that the demand is given by QD = 10 - P and supply is given by QS = P - 2 Market equilibrium occurs where P* = 6 and Q* = 4 Welfare Loss Computations Restriction of output to Q0 = 3 would create a gap between what demanders are willing to pay (PD) and what suppliers require (PS) PD = 10 - 3 = 7 PS = 2 + 3 = 5 Welfare Loss Computations Welfare Loss Computations The welfare loss will be shared by producers and consumers In general, it will depend on the price elasticity of demand and the price elasticity of supply to determine who bears the larger portion of the loss the side of the market with the smallest price elasticity (in absolute value) Price Controls and Shortages Sometimes governments may seek to control prices at below equilibrium levels this will lead to a shortage We can look at the changes in producer and consumer surplus from this policy to anal