1. Voluntary Exchange

2. Voluntary Exchange
In the free-market, buyers and sellers voluntarily come together to seek mutual benefits.

3. Voluntary Exchange
In the free-market, buyers and sellers voluntarily come together to seek mutual benefits.

4. Voluntary Exchange
In the free-market, buyers and sellers voluntarily come together to seek mutual benefits.

5. Voluntary Exchange
In the free-market, buyers and sellers voluntarily come together to seek mutual benefits.

6. Example of Voluntary Exchange
You want to buy a truck so you go to the local dealership.
You are willing to spend up to $20,000 for a new 4x4.
The seller is willing to sell this truck for no less than $15,000.
After some negotiation you buy the truck for $18,000.
Analysis:
Buyer’ Maximum-
Sellers Minimum-
Price-
Consumer’s Surplus-
Producer’s Surplus-
$20,000
$15,000
$18,000
$2,000
$3,000

7. Voluntary Exchange Terms
Consumer Surplus is the difference between what you are willing to pay and what you actually pay.
CS = Buyer’s Maximum – Price
Producer’s Surplus is the difference between the price the seller received and how much they were willing to sell it for.
PS = Price – Seller’s Minimum

8. The Pearl Exchange
WARNING: Many students complain that their teachers don’t do enough hands-on activities. Many teachers complain that hands-on activities are a waste of time because the students slack off. I promise to create fun and meaningful activities, if you promise to actively participate and stay focused. NO ANCHORS!

9. The Pearl Exchange There will be four trading sessions.
In each session, you can only buy or sell ONCE.
When you make a deal, shake hands and come to the board to record your negotiated price. Then go back to your seat and record your surplus in the table.
If you do not make a sale or purchase, you take the entire minimum or maximum price for a LOSS.
Are you the best negotiator in the class? Let’s find out.
Good Luck!

10. Supply and Demand Analysis
Easy as 1, 2, 3
Before the change:
Draw supply and demand
Label original equilibrium price and quantity
The change:
Did it affect supply or demand first?
Which determinant caused the shift?
Draw increase or decrease
After change:
Label new equilibrium?
What happens to Price?
What happens to Output (Quantity)?

11. Voluntary Exchange Activity