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Author Question: Do all consumers in a competitive market receive the same level of consumer surplus? Explain with an ... (Read 794 times)

saraeharris

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Do all consumers in a competitive market receive the same level of consumer surplus? Explain with an example.
 
  What will be an ideal response?

Question 2

Why do we need a units-free measure of the responsiveness of the quantity supplied of a good or service to a change in its price?
 
  What will be an ideal response?



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ecox1012

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Answer to Question 1

The amount of consumer surplus that each consumer enjoys will depend on the market price and the consumer's willingness to pay, which is derived from his or her individual demand curve. Thus, in a market where all consumers pay the same price, the higher an individual consumer's willingness to pay, the greater his consumer surplus. Suppose you and your friend were both buying French fries, but you like them much more than your friend does. Your consumer surplus in this case will be higher than your friend's because your willingness to pay for them is higher.

Answer to Question 2

The elasticity of supply is a units-free measure. We need a units-free measure of the elasticity of supply for the same reason we need a units-free measure of the elasticity of demand: Because the value of the elasticity of supply is independent of the units used to measure the price and quantity of the good, the elasticity of supply can be compared across the same good when quantity is measured in different units and/or the price is measured in different currencies. In addition, the elasticities of supply of different goods also can be compared even though they are measured in different units.





 

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