AP Econ Week#21

Winter 2014Ch#4 & Ch#5

Economics 2/2/15http://mrmilewski.com

• No School: Snow Day#2

Photo: Mr. Milewski Grosse Ile, MI 2/1/15

Economics 2/3/15http://mrmilewski.com

• No School: Snow Day#3

Photo: Mr. Milewski Grosse Ile, MI 2/3/15

Economics 2/4/15 http://mrmilewski.com

• OBJECTIVE: Examine the effect of regulations on market economies. APMicro-I.B

• Language objective: Write about regulations on market economies.

• I. Administrative Stuff-attendance

• II. Commanding Heights-questions on episode#2 Day#1

• Homework: Begin reading Ch#5

Economics 2/5/15 http://mrmilewski.com

• OBJECTIVE: Begin examination of market failures. APMicro-I.B

• Language objective: Write about market failures.

• I. Journal#52 pt.A-continue watching Commanding Heights

• II. Journal#52 pt.B-notes on market failures(Chapter#5)

• Homework: On learnsmart & Finish reading Ch#5

Market Failures

• Market fails to produce the right amount of the product

• Resources may be:• Over-allocated• Under-allocated

LO1 5-6

Demand-Side Failures

• Impossible to charge consumers what they are willing to pay for the product

• Some can enjoy benefits without paying

LO1 5-7

Supply-Side Failures

• Occurs when a firm does not pay the full cost of producing its output

• External costs of producing the good are not reflected in supply

LO1 5-8

Efficiently Functioning Markets

• Demand curve must reflect the consumers full willingness to pay

• Supply curve must reflect all the costs of production

LO1 5-9

Consumer Surplus

• Difference between what a consumer is willing to pay for a good and what the consumer actually pays

• Extra benefit from paying less than the maximum price

LO2 5-10

Consumer Surplus

LO2

Consumer Surplus

(1)Person

(2)Maximum

Price Willing to Pay

(3)Actual Price (Equilibrium

Price)

(4)Consumer

Surplus

Bob $13 $8 $5 (=$13-$8)

Barb 12 8 4 (=$12-$8)

Bill 11 8 3 (=$11-$8)

Bart 10 8 2 (=$10-$8)

Brent 9 8 1 (= $9-$8)

Betty 8 8 0 (= $8-$8)

5-11

Consumer Surplus

LO2LO2

Pric

e (p

er b

ag)

Quantity (bags)

D

Q1

P1

Consumer Surplus

Equilibrium Price

5-12

Producer Surplus

• Difference between the actual price a producer receives and the minimum price they would accept

• Extra benefit from receiving a higher price

LO2 5-13

Producer Surplus

LO2

Producer Surplus

(1)Person

(2)Minimum

Acceptable Price

(3)Actual Price (Equilibrium

Price)

(4)Producer Surplus

Carlos $3 $8 $5 (=$8-$3)

Courtney 4 8 4 (=$8-$4)

Chuck 5 8 3 (=$8-$5)

Cindy 6 8 2 (=$8-$6)

Craig 7 8 1 (=$8-$7)

Chad 8 8 0 (=$8-$8)

5-14

Producer Surplus

LO2LO2

Pric

e (p

er b

ag)

Quantity (bags)

S

Q1

P1

Equilibrium price

Producer surplus

5-15

New Access Code

• W433-DX47-G6NJ-87EA-RH66

Economics 2/6/15 http://mrmilewski.com

• OBJECTIVE: Continue examination of market failures. APMicro-I.B

• Language objective: Discuss failures.

• I. Administrative Stuff-attendance

• II. Review homework on learnsmart-discuss concepts from online homework(Chapter#5)

• Homework: Continue reading Ch#5

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