MicroEconomics help thread (help wanted)

[D. Medvedev Fan]

For help with microeconomics class.

Can someone help explain to me marginal benefit and also consumer surplus and how you find it?

[anthrogirl]

Ask dlw (LoveWarrior). He's a PhD in Economics. He'll be able to explain.

ag

[CatholicSage]

In case you didn't ask dlw, marginal benefit is the principle that as you add workers, productivity increases, but there comes a point where adding one more worker will create less production than the worker before him did, thus decreasing overall productivity. Simple analogy that my econ teacher used: you are eating mini-tacos, and up to the fourth or fifth one they are pretty good, but that sixth taco will give you less satisfaction than the fifth, and the seventh less than the sixth, and so on, which brings down the average satisfaction of the tacos (which would have been higher if you had stopped at five). I hope that's clear, but more importantly I hope it's correct; my Econ class was last year :smile:

Consumer surplus is the difference between what a consumer would be willing to pay for a product and what he/she actually has to pay; I'd pay $500 for that CD, but I only have to pay $15! That's a surplus of $485. Good deal :thumb:

[D. Medvedev Fan]

I'm waiting for a reply. Thank you very much. Can you do marginal revenue?

[CatholicSage]

I'm not sure exactly, but I can guess from the components "marginal" and "revenue." It sounds like the amount of revenue a business would receive from selling one additional unit of something.

[Da Lone-Warrior]

You don't need a PhD in Econ to answer these questions. LS did a fine job.

dlw

[CatholicSage]

Thanks! :woohoo:

[D. Medvedev Fan]

Ok, so if I have a supply and demand curve and production is changed to half, is there some easy way to figure out the deadweight?

[CatholicSage]

I'm not so sure about this one. Better ask Love-Warrior.

[D. Medvedev Fan]

He never responed to my first PM.

[Xavier]

What is "deadweight"?

[D. Medvedev Fan]

What is "deadweight"?
I should have said deadweight loss.

Supply and demand, or marginal cost and marginal benefit are most efficient where the two graph lines cross. Deadweight loss is kind of like the amount of inefficiency that occurs if production differs from this efficient quantity. Deadweight loss is the decrease in consumer surplus and producer surplus that results from an inefficient level of production.

In the attached file, A is an example of deadweight loss from underproduction. If the production is restricted to half of the efficient amount, the deadweight is the area in the light gray, and the consumer and producer surplus are reduced.

In the attached file, B is an example of deadweight loss from overproduction.

Consumer surplus is the marginal benefit from a good or service minus the price paid for it, summered over the quantity consumed.

Marginal benefit is the maximum price that people are willing to pay.

Producer surplus is price of a good minus the marginal cost of producing it, summed over the quantity produced.

Marginal cost is the cost of producing one more unit of a good or service.


Source: Foundations of Microeconomics by Bade and Parkin, 2nd Ed.

[D. Medvedev Fan]

Short-run cost curves are evil. :bawl: