Value versus price versus cost

Remember consumer surplus and producer surplus…and value versus price versus cost …..
Using the example on pp. 59 – 60 and Figure 4-1,
When the price of this product is $20,
i.) the value1 of consuming 40 units of this product is equal to $2,400.
ii.) the total expenditure on 40 units of this product is equal to $800.
iii.) consumer surplus on 40 units of this product is equal to $1,600.
1 This is all the value that society gets from our consumption of this product. Why? Because we
are part of society and all our value is equal to all society’s value. We will see later in this chapter
that this is not always the case.
2
vi.) the total revenue from selling 40 units of this product is equal to
.
v.) the total variable cost of producing 40 units of this product is equal to
.
vi.) producer surplus on 40 units of this product is equal to .
vii.) social welfare from 40 units of this product is equal to .
OR
i.) the value of consuming 40 units of this product is equal to .
ii.) the total variable cost of 40 units of this product is equal to
.
iii.) the net social value from 40 units of this product is equal to
.
BTW When you see a supply curve, you know that the market structure is
________________.
In your Economics 201 course and/or your Economics 202 course, you would
have looked at the trade-off between efficiency and equity. Societies that focus
on being very efficient tend to produce a lot of output but it is not evenly
distributed within their population (the ‘pie’ is big but some slices are bigger than
others).