University:
University of Houston
Course:
FINA 4330 | Corporate Finance
Academic year:

2023
Views:

115

Pages:

10
Author:

King Mata

Example:The Aggregate Demand For Wheat  Domestic demand is relatively price inelastic (-0.2), while export demand is more price elastic (-0.4 to -0.5). The Aggregate Demand for Wheat Price ($/bushel) 20 A 18 16 14 12 10 C 8 Export 6 Demand Domestic 4 Demand 2 B D 0 1000 2000 3000 4000 Quantity (millions of bushels per year) The Aggregate Demand for Wheat Price ($/bushel) Total world demand is 20 A the horizontal sum of the domestic demand AB and 18 export demand CD. 16 Total Demand 14 12 E C 10 8 Export 6 Demand Domestic 4 Demand 2 B D F 0 1000 2000 3000 4000 Quantity (millions of bushels per year) Consumer Surplus  Consumer surplus is the difference between what a consumer is willing to pay for a good and what the consumer actually pays when buying it. Consumer Surplus Price ($ per ticket) 20 19 18 17 16 15 14 13 0 1 2 3 4 5 6 Rock Concert Tickets Consumer Surplus Price ($ per ticket) The consumer surplus of purchasing 6 concert tickets is the sum of the surplus derived from each one individually. 20 19 18 17 16 15 14 13 0 Market Price 1 2 3 4 5 6 Rock Concert Tickets Consumer Surplus Price ($ per ticket) The consumer surplus of purchasing 6 concert tickets is the sum of the surplus derived from each one individually. 20 19 18 17 16 15 14 13 0 Consumer Surplus Market Price 1 2 3 4 5 6 Rock Concert Tickets Consumer Surplus Price ($ per ticket) The consumer’s actual expenditure is the price times the quantity purchased. 20 19 18 17 16 15 14 13 Consumer Surplus Market Price Actual Expenditure 0 1 2 3 4 5 6 Rock Concert Tickets Consumer Surplus  The stepladder demand curve can be converted into a straight-line demand curve by making the units of the good smaller. Consumer Surplus Price ($ per ticket) For goods that cannot be divided into small parts the consumer surplus is the yellow area below the demand curve. 20 19 18 17 16 15 14 13 Consumer Surplus Market Price Demand Curve Actual Expenditure 0 1 2 3 4 5 6 Rock Concert Tickets