Page 539 - Krugmans Economics for AP Text Book_Neat

figure 50.2

Reallocating Consumption Price
of book
Lowers Consumer Surplus Loss in consumer S
Ana (point A) has a willingness to pay of $35. Bob surplus if the book
is taken from Ana
(point B) has a willingness to pay of only $25. At the
and given to Bob
market equilibrium price of $30, Ana purchases a
book but Bob does not. If we rearrange consumption A
by taking a book from Ana and giving it to Bob, con- $35 Section 9 Behind the Demand Curve: Consumer Choice
sumer surplus declines by $10 and, as a result, total E
surplus declines by $10. The market equilibrium 30
generates the highest possible consumer surplus by B
ensuring that those who consume the good are 25
those who most value it.

D

0 1,000 Quantity of books

doesn’t depend on which two students we pick. Every student who buys a book at the mar-
ket equilibrium price has a willingness to pay of $30 or more, and every student who
doesn’t buy a book has a willingness to pay of less than $30. So reallocating the good
among consumers always means taking a book away from a student who values it more
and giving it to one who values it less. This necessarily reduces total consumer surplus.
The Reallocation of Sales Among Sellers The committee might try to increase total
surplus by altering who sells their books, taking sales away from sellers who would have
sold their books in the market equilibrium and instead compelling those who would
not have sold their books in the market equilibrium to sell them. Figure 50.3 shows why
this will result in lower surplus. Here points X and Y show the positions on the supply

figure 50.3

Reallocating Sales Lowers Price
Producer Surplus of book
S
Yvonne (point Y ) has a cost of $35, $10 more than
Xavier (point X ), who has a cost of $25. At the mar-
ket equilibrium price of $30, Xavier sells a book but
Yvonne does not. If we rearrange sales by prevent- Y
ing Xavier from selling his book and compelling $35 Loss in producer
Yvonne to sell hers, producer surplus declines by E surplus if Yvonne
$10 and, as a result, total surplus declines by $10. 30 is made to sell
The market equilibrium generates the highest pos- X the book instead
sible producer surplus by assuring that those who 25 of Xavier
sell the good are those who most value the right
to sell it.

D

0 1,000 Quantity of books

module 50 Efficiency and Deadweight Loss 497