ECON 202 Lecture Notes - Lecture 4: Pizza Pizza, Price Ceiling, Economic Surplus
Document Summary
Movement (up or down): price increase or decrease. Binding price ceiling- government, some sort of policy/entity poses a price that caps the amount of money people can charge. Consumer surplus- difference between willingness to pay (wtp) and actual price paid. Negative marginal utility implies the last unit consumed makes the consumer worse off. Suppose you have a demand curve that is linear. On a graph- calculate the area of the triangle from the demand curve. Price discrimination: grapes of wrath article, car salesman varies prices for cars based on each person depending on how much they were willing to pay. Practice problems: you are the manager of fun world, a small amusement park. The accompanying diagram shows the demand curve of a typical customer at fun world. Suppose that the price of each ride is . Consumer surplus: (5)(10)=25: suppose a firm is able to perfectly price discriminate.
