logging in or signing up producers surplus riyamehta Download Post to : URL : Related Presentations : Let's Connect Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Copy embed code: Embed: Flash iPad Dynamic Copy Does not support media & animations Automatically changes to Flash or non-Flash embed WordPress Embed Customize Embed URL: Copy Thumbnail: Copy The presentation is successfully added In Your Favorites. Views: 448 Category: Education License: All Rights Reserved Like it (0) Dislike it (0) Added: December 14, 2011 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript `: ` PRODUCER’S SURPLUS AND EQUILIBRIUMCONCEPTS: CONCEPTS 1.Introduction to Producer’s Surplus 2.Producer’s Benefits 3.Producer’s Equilibrium (a)Maximizing output subject to a cost constraint (b)Minimizing cost subject to an output constraintPRODUCER’S SURPLUS : PRODUCER’S SURPLUS Market Supply depicts the various quantities that suppliers would be willing to sell at different prices. Supply curve can also be viewed as a measure of the marginal (opportunity) cost to the seller of supplying various quantities of the good. Assumption: The marginal (opportunity) cost of production increases as market output expands. Producer’s marginal cost of production is the lowest price he/she would accept. PRODUCER’S SURPLUS: PRODUCER’S SURPLUS Producer Surplus is the amount a seller is paid minus the cost of production. Producer surplus measures the benefit to sellers of participating in a market. A producer might be willing to accept $3 (his/her MC of production) to supply the good but in fact gets $5 market price. In this case, producer gains a surplus of $2.PowerPoint Presentation: S $6 6 $5 $4 $3 $2 $1 5 4 3 2 1 P Q PS = ($6 x 6) - ($1 +$2 + $3 + $4 + $5 + $6) = $15PowerPoint Presentation: S $6 6 $5 $4 $3 $2 $1 5 4 3 2 1 Total Producer Benefits (Revenue) P QPowerPoint Presentation: S $6 6 $5 $4 $3 $2 $1 5 4 3 2 1 Producer Surplus =$15 Producer Costs P QProducers equilibrium : Producers equilibrium Producers try to maximize output with minimum costs. Producers equilibrium can be explained with the help of two curves: 1.Iso-quant curve 2.Iso-cost curveProducers equilibrium : Producers equilibrium Isoquant curve shows all possible combinations of two inputs; labour and capital that will give the producer same output level . Output is fixed along a given isoquant . Isocost Line shows all possible combinations of Labour and Capital that can be purchased given PL and PK and limited producer budget (total cost outlay).Maximizing output subject to cost constraint: : Maximizing output subject to cost constraint: Producer has to maximize his output with a given cost structure . In this situation,an isoquant map has to be combined with a single isocost line to identify the point of equilibrium. Higher isoquants indicate higher level of production.PowerPoint Presentation: Diagram showing producer equilibrium . E D K L Is3 Is2 Is3 k1 0 L1conditions: conditions Two conditions necessary for producer equilibrium: 1.The iso -cost line is tangent to iso -quant 2.Iso-quant is convex to the origin at the point of equilibriumMinimizing cost subject to an output constraint:: Minimizing cost subject to an output constraint: Producer wants to produce the output with minimum cost. Hence, there will be a single isoquant. This will ensure his equilibrium.Conclusion:: Conclusion: We studied producer’s surplus, producer’s equilibrium in detail. You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.