Welcome to Economics!  Turn your homework into the box  Grab your notebook  Find a seat where you are free from distractions and be seated when the bell rings.  Create a new entry for “market outcomes”  When ready, come grab entrance quiz from Mr. Talcott  Turn your homework into the box  Grab your notebook  Find a seat where you are free from distractions and be seated when the bell rings.  Create a new entry for “market outcomes”  When ready, come grab entrance quiz from Mr. Talcott

Do Now- “Market Outcomes”  Complete the Entrance Ticket  Silent and independent  Complete the Entrance Ticket  Silent and independent 5 minutes End

Objective of the day:  I CAN SHOW HOW BOTH CONSUMERS AND PRODUCERS BENEFIT FROM EQUILIBRIUM IN ORDER TO CALCULATE PROFIT AND CONSUMER / PRODUCER SURPLUS.

QOD  D O MARKETS ALWAYS CREATE THE BEST OUTCOMES IN SOCIETY ?

Plan  Entrance Ticket  Consumer/Producer Surplus Notes  Partner Problem Solving  Independent Work- Challenge Problems  Entrance Ticket  Consumer/Producer Surplus Notes  Partner Problem Solving  Independent Work- Challenge Problems

Up to this point…  Market equilibrium is the best possible outcome for a society

The concept of Surplus  Surplus is the amount of benefit received in a transaction  * this is different than a market surplus  Surplus is the amount of benefit received in a transaction  * this is different than a market surplus

Consumer Surplus  amount a buyer is willing to pay for a good minus the amount the buyer actually pays  Sometimes you pay less than what you would be willing to pay, this leaves money in your pocket. Add up everyone’s and this is the consumer surplus.  amount a buyer is willing to pay for a good minus the amount the buyer actually pays  Sometimes you pay less than what you would be willing to pay, this leaves money in your pocket. Add up everyone’s and this is the consumer surplus.

Let’s do a problem  The demand curve for Nike shoes is modeled using the demand schedule below. What is the consumer surplus if the price of shoes is $100. PriceQuantity $

CFU:  What would be the Consumer Surplus if the price is $50? 3 minutes End

Producer Surplus  the amount a seller is paid for a good minus the seller’s cost of providing it  *Also called profit  If it cost me 15 cents to make something and I sell it for a dollar, I make 85 cents of profit  the amount a seller is paid for a good minus the seller’s cost of providing it  *Also called profit  If it cost me 15 cents to make something and I sell it for a dollar, I make 85 cents of profit

Let’s do a problem  The Supply curve for Nike shoes is modeled using the supply schedule below. What is the procucer surplus if the price of shoes is $100. PriceQuantity $

CFU:  What would be the Producer Surplus if the price is $50? 3 minutes End

Total Surplus  Total Surplus = Consumer Surplus + Producer Surplus  Market efficiency- when a market maximizes total surplus, the market is the most effiecient  Equilibrium  Total Surplus = Consumer Surplus + Producer Surplus  Market efficiency- when a market maximizes total surplus, the market is the most effiecient  Equilibrium

CFU  What is the Total Surplus in the market for Nike shoes at $100? At $50?

With a partner (in your notebooks)  Decide who is partner 1 and partner 2.  Complete the Market efficiency.  Problem 1:  Partner 1- Producer Surplus  Partner 2- Consumer Surplus  Problem 2:  Partner 1- Consumer Surplus  Partner 2- Producer Surplus  Calculate Total Surplus together  Decide who is partner 1 and partner 2.  Complete the Market efficiency.  Problem 1:  Partner 1- Producer Surplus  Partner 2- Consumer Surplus  Problem 2:  Partner 1- Consumer Surplus  Partner 2- Producer Surplus  Calculate Total Surplus together 15 minutes End

By yourself  Complete the 5 question problem set.  Silently and Independently  Complete the 5 question problem set.  Silently and Independently

Homework  Practice problems for Market Efficiency  Due next class  Practice problems for Market Efficiency  Due next class