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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
AP Exam Registration • Students, you can now pay for your AP Exams by cash
(NO CHECK). Give the cash to the secretary in the Counseling Office Tuesdays and Thursdays.
• Exam fees are $91.00 per exam (there are 2 exams for Econ, so the cost is $182). If you receive free or reduced lunch, Exam fees are $25.00 per exam.
• Exam fees MUST BE PAID by March 17th!