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Week 6 · Assignment: Traditional alternative (no AI)

Week 6 — Measuring the Gains: Surplus, Efficiency, and Who Benefits — Traditional alternative (no AI)

Principles of Microeconomics Free sample edition
Traditional alternative (no AI), unpublished. In the course this is a separate assignment that ships unpublished beside the adaptive assignment: same objective, no AI. An instructor who prefers it publishes it and unpublishes or deletes the adaptive one, as the note at its top says.

Instructors: publish this instead of the adaptive version if you prefer, and unpublish or delete the adaptive one.

Assignment 6 of the term — measure the gains from trade on this week's illustrative ladder and market, show why the efficient quantity gives the biggest total, and explain to someone outside economics why an efficient market is not automatically a fair one.

This week you learned to measure consumer surplus, producer surplus, and total surplus, first on a ladder of buyers and sellers and then as triangles on the supply-and-demand diagram, and to explain why the competitive equilibrium is efficient in the model. In Week 4 you found where the running market's demand and supply cross, and in Week 1 you learned the line between positive and normative statements that the last part of this assignment uses. In this assignment you work four short problems, interpret each one, and explain a claim to someone who has never studied economics. This week's lecture tutorial, quiz, discussion, and Model Workshop practice the same ideas from other angles.

The task

You will use these materials, all illustrative numbers built for this course (not real data) and all from this week's chapter:

  • The used-bicycle ladder: five buyers would pay at most 100, 80, 70, 50, and 30 dollars for one bicycle, and five sellers would accept no less than 20, 30, 50, 70, and 90 dollars. At a price of 60 dollars, three bicycles sell.
  • The course's running market, read as prices: demand P = 9 − Q ⁄ 10 and supply P = 3 + Q ⁄ 10, with P in dollars and Q in units per day. The two lines cross at 6 dollars and 30 units a day.

Work these four problems, showing your arithmetic:

  1. On the illustrative used-bicycle ladder, bicycles sell for 60 dollars and the three sellers who sell have costs of 20, 30, and 50 dollars. What is the producer surplus?
  2. On the same illustrative ladder, pair the buyers who value a bicycle at 100, 80, and 70 dollars with the sellers whose costs are 20, 30, and 50 dollars, highest value with lowest cost. What is the total surplus from these three efficient trades?
  3. In the course's illustrative market, demand read as prices is P = 9 − Q ⁄ 10, and the equilibrium is 30 units a day at 6 dollars. What is the consumer surplus at the equilibrium, in dollars per day?
  4. In the same illustrative market, supply read as prices is P = 3 + Q ⁄ 10, so at 20 units buyers value the last unit at 7 dollars and it costs sellers 5 dollars. If trading stopped at 20 units a day, what total surplus would those 20 units create, in dollars per day?

Beside each answer, add one brief interpretation. For problem 1, say in words what the producer surplus means for the sellers and tie it to what producer surplus measures. For problem 2, explain why three trades is the efficient number, using the fourth pair on the ladder. For problem 3, describe in words where the consumer-surplus triangle sits on the diagram and why it is a triangle rather than a rectangle. For problem 4, explain what is lost by stopping at 20 units and why 30 units is efficient in the model.

Explain it to a non-expert

A city council member has never studied economics. After hearing about the bicycle market, the council member says: "That market is efficient, so everyone got a fair deal, including the buyer who went home without a bicycle." Write a 3–5 sentence message to the council member that explains in everyday words what "efficient" means here, says which part of the claim the model can check and which part is a question of values, and names one limit, such as that a buyer's willingness to pay also reflects how much money the buyer has. Explain any technical term in everyday words. More than one accurate wording can be defensible, and the message does not need to decide whether the outcome is fair.

For a different, ungraded example, imagine a bake-sale organizer who says: "We sold every cupcake at 3 dollars, so the people who bought them must have wanted them more than anyone who missed out." Model answer: "Selling out tells us each buyer valued a cupcake at 3 dollars or more, so each sale left that buyer ahead. It does not tell us that the people who missed out wanted one less, because someone who arrived late might have valued a cupcake highly and found none left. Whether first come, first served is a fair way to share is a separate question about values, not something the sales numbers can settle. One limit: we never saw anyone's top price, only who paid 3 dollars."

Use that pattern for your message to the council member, with your own explanation and evidence.

Show your arithmetic. A reader should be able to reproduce every number you report from the values above without guessing which values or steps you used.

Deliverables

Submit a single surplus report containing:

  • the four answers, each with the arithmetic shown and a brief interpretation as the task describes;
  • your message to the council member, explaining efficiency in everyday words, saying which part of the claim the model can check and which part is a question of values, and naming one limit; and
  • a one-line restatement of the values you used, so your results are reproducible.

Keep it to roughly one page. Clear and correct beats long.

Choose how you show it. Present your report as written text, or as a recorded audio or video explanation of about three minutes with a transcript, or as a labelled diagram that describes the ladder and the two surplus triangles in words with a short note. Every form is graded by the same scoring criteria. Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

This version is designed to be completed without AI: do the computations, the interpretations, and the writing yourself, without any AI tool. You may use a calculator or a spreadsheet for the arithmetic. Submitting AI-generated work as your own, or copying another student's work, is an integrity violation under the course policy.

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