文档介绍：Chapter Fourteen
Consumer’s Surplus
ary Measures of Gains-to-Trade
You can buy as much rice as you wish at RMB1 per kilogram once you enter the gasoline market.
Q: What is the most you would pay to enter the market?
A: You would pay up to the dollar value of the gains-to-trade you would enjoy once in the market.
How can such gains-to-trade be measured?
ary Measures of Gains-to-Trade
Three such measures are:
Consumer’s Surplus
Equivalent Variation, pensating Variation.
Only in one special circumstance do these three measures coincide.
ary Measures of Gains-to-Trade
Suppose rice can be bought only in lumps of one kilogram.
Use r1 to denote the most a single consumer would pay for a 1st kilogram -- call this her reservation price for the 1st kilogram.
r1 is the dollar equivalent of the marginal utility of the 1st kilogram.
$ Equivalent Utility Gains
Now that she has one kilogram, use r2 to denote the most she would pay for a 2nd kilogram -- this is her reservation price for the 2nd kilogram.
r2 is the dollar equivalent of the marginal utility of the 2nd gallon.
$ Equivalent Utility Gains
Generally, if she already has n-1 kilograms of rice then rn denotes the most she will pay for an nth kilogram.
rn is the dollar equivalent of the marginal utility of the nth kilogram.
$ Equivalent Utility Gains
r1 + …+ rn will therefore be the dollar equivalent of the total change to utility from acquiring n kilograms of rice at a price of $0.
So r1 + …+ rn - pGn will be the dollar equivalent of the total change to utility from acquiring n kilograms of rice at a price of $pG each.
$ Equivalent Utility Gains
A plot of r1, r2, …, rn, … against n is a reservation-price curve. This is not quite the same as the consumer’s demand curve for rice.
$ Equivalent Utility Gains
$ Equivalent Utility Gains
1
2
3
4
5
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r1
r2
r3
r4
r5
r6