You can either pick a price and try to sell i a or anction i

You can either pick a price and try to sell i a or anction it off on 5 You currently have a television that eBay Which method d)\" will yield a higher prosducer surplus Why this market decreases. How will this afte sarplas? Explain. [LO 5.3] lss in the koss of otal srplus that occurs Any iner Comider a market in equilibrium.Sup . Consider the market for plane tickets to Hawai, A winter in the mainland United States incrcase for tropical vacations, shifting the demand c right. The supply curve slanys constant. Does ou plus increase or decreaset (Mit: Sketch sapply and demand curve and look at what so the size of the triangle that represents toral when the demand curve shifts right.)[LO 5.4 OS.8 Esplan why corvecting a missing market can A market is \"missing\" when there is a situation in which people would like to esgage in mutually henefi- cial trades of goods and services hat can\'t hecause no&. You need to paint your fence, but you really hate ??? fr tim exit. A missing market is a special case of a market in which quantity is held below the markets can occur for many reasons, inclading gov ernment intervention or a lack of information or sech solegy When missing markets are filled people are able to trade. which generates surplas task. You decide to hire the kid next door to do in t you. You would be willing to pay him up to Sto but you start by offering $50, expecting to nepi ate. To your great surprise, he accepts your $50 When you tell your friend about the great deal she is shocked that you would take advantape of some one. What can you tell your friend to assare her tu TABLES Buy Fre you did not cheat the kid next door? ILO 5.4) 9 New York City has a long-standing policy of con Review Questions Mo Bill is a prolessional photographer. His camera is bro ken and he noods a new one within the next hour, or he will miss an important deadline. Lisa is a high-school mudent who doesa\'t have a camera but wants to get one o take pictures at her prom nest month. Who do you think would huve a higher willingness to pay for a par- price ceiling on ret is the market for apartments lely to be efficient orcient? What does this imply f the size of tota An 0 Total surplus icular camers soday? Why ILO 51 Explain howplus is still maximized if pric increases due rease in demand. [LO 5.5 2. You are in the mark.? for a new couch and have found adverdisemens for the kind of couch you want to buy 0 seller nes in her ad that she is selling because she is moving to a smaller apartment, and the couch won\'t fit in the new space. The other seller says he is selling hecause the couch doesnt match his other furniture. Which seller do you expect to buy from? 11. When the price of gasoline was very high in the sun mer of 2008, several U.S. presidential candidanes po posed implementing a national price ceiling to keep fuel affordable. How would this policy have affectsd producer and coesumer surplus? How would it hanc affected total surplus? [LO s.6) Why? (Hint. Thak who would be the more motivated 12·Consider a policy to help struggling times bwying a bor of vintage reconds. You are trying to har 13, Irent control creates deadweight loss for bokh have been if the seller hadn\'T overheand you? [LO 5.2) a minimum trade price for wheat. Will t tive way to increase their surplus? Explain. ILO 5.6 3 Suppose you are at a fleca market and are considering gain down the price, but the seller overhears you telling a friend that you are willing to pay up to $30. Why is your consamer surplas now likely to be lower than it woulkd ens and suppliers of housing, why are consumers in favor of this policy? [LO 5.71 14. Suppose price is S percent above equilibrium in wo Cossider a market in equilibrium Suppose supply in this market increases. How will this affect consumer markets: a market for a necessity and a arket for al ury good. All else equal (inclading supply in which market do you expect plus? Explain. 10 521 deadweight loss 1o greater? Explain. [LO 5.7

Solution

Question 2

Seller one is selling the couch because she is moving to smaller apartment and thus does not have space at her new apartment to keep the couch.

Seller two is selling the couch because the couch does not match his other furniture even though he has space to keep the couch.

The willingness to sell of seller one would be higher as she has to get rid of couch before moving to small apartment otherwise she has to discard the couch due to lack of space. No such urgency is with the seller two.

Thus, seller one would be ready to accept the lower price for couch relative to seller two.

Hence, we would buy the couch from seller one because we can get the couch at lower price from seller one relative to seller two.

Question 3

Consumer surplus refers to the difference between maximum willingness to pay for a good and the actual price paid for the good.

Greater the difference between the two, greater would be the consumer surplus and vice-versa.

In given case, seller has overheard our maximum willingness to pay for the box of vintage records.

As seller knows our maximum willingness to pay for the records, he would charge us a higher price than he would if he had not overheard us.

Due to this, the difference between the maximum willingness to pay and actual price paid would be lower in case the seller has overheard us relative to case in which he had not overheard us.

The difference between the maximum willingness to pay and actual price paid is the consumer surplus.

Thus,

Our consumer surplus is now likely to be lower than it would have been if the seller had not overheard us.