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Week 8 · Chapter

Chapter 8 — Midterm Review & Exam

Principles of Microeconomics Free sample edition

The module's primary reading · ~35–45 minutes · Objective 1 (use the tools of economic modeling — scarcity, opportunity cost, the production possibilities frontier, comparative advantage, and the gains from trade — and distinguish positive statements (what is) from normative statements (what ought to be)), Objective 2 (explain how demand and supply determine a market's equilibrium price and quantity, and predict how a shift in demand or supply changes them), Objective 3 (compute and interpret price, income, and cross-price elasticities of demand by the midpoint formula, and relate price elasticity to total revenue), and Objective 4 (measure consumer surplus, producer surplus, and market efficiency, and analyze price ceilings, price floors, taxes, and subsidies, including who bears a tax and the deadweight loss) · Read it first this week, before the lecture, the slide deck, the practice set, and the discussion, and well before you sit the midterm.

In plain language

This week you look back over seven weeks of models and ask each one for only two things. They are the one graph it draws (the picture you sketch) and the one calculation it asks for (the number you work out from it). Then you learn one small new habit called thinking at the margin (deciding a choice one extra unit at a time). It asks what one more hour would add and what it would cost. Last, you sit the midterm, which checks the first seven weeks only.

Why you already care about this

Picture a café on a quiet street. It closes at 6 in the evening, and its owner wonders whether to stay open until 7, then 8, then 9. Staying open one more hour brings in some extra sales and costs some extra wages and electricity. The owner does not need the café's whole yearly budget to decide. The owner needs one comparison, made one hour at a time.

That is the new idea this week, and it is small. Most of this chapter is review. Since Week 1 you have built six models: the frontier, comparative advantage, supply and demand, elasticity, surplus, and price controls and taxes. A stack of notes that tall can feel heavy before a midterm. So this chapter shrinks each model to its graph and its calculation, reruns each one on numbers you have already met, and names the classic wrong turn beside it.

By the end of this chapter you will be able to:

  • read the frontier's slope as an opportunity cost and sort points on, inside, and outside it;
  • find comparative advantage from an opportunity-cost table and test whether a trading rate helps both sides;
  • solve Qd = Qs for the equilibrium and name the curve, the direction, and the new price and quantity after a shift;
  • compute a price elasticity by the midpoint formula and use the total-revenue test;
  • compute consumer surplus, producer surplus, a tax's buyer and seller prices, its revenue, and a deadweight loss;
  • apply the marginal-benefit and marginal-cost rule to a choice and leave a sunk cost out of it.

Carry this: one graph, one calculation; then the next unit, not the last.

Where we are

  • Already covered: Week 1 built the frontier and opportunity cost. Week 2 found comparative advantage and the gains from trade. Weeks 3 and 4 built demand, supply, and equilibrium. Week 5 measured elasticity, Week 6 measured surplus, and Week 7 ran price controls, taxes, and subsidies through the market.
  • This week: a review of those six models, each reduced to its one graph and its one calculation; one light new habit, thinking at the margin; and the midterm.
  • How they connect: every review example is a number you already worked, and the margin habit is a new way to ask the Week 1 question of what a choice really costs.
  • Where we're going next: Week 9 begins a new unit on firms, starting with production and costs, and every firm week uses the margin habit you meet here.

Week 1 said that every choice has an opportunity cost, the value of the best alternative you give up. Weeks 3 to 7 used one running market, with demand Qd = 90 − 10P and supply Qs = 10P − 30, prices in dollars and quantities in units per day. Every number in this chapter is illustrative, built for this course rather than measured from a real market. That is an honesty note worth repeating before an exam: the models teach the logic, not the size of any real price.

1. Draw the frontier: the slope and the two points

Think of a weekend with two jobs to do: studying and paid shifts. Every hour you spend on one is an hour you cannot spend on the other. The frontier draws that trade-off for a whole economy.

Recall the island from Week 1. It can catch fish or gather coconuts each day. The production possibilities frontier is the graph of every combination of the two goods the island can make when it uses all of its resources fully and efficiently. Picture fish per day along the bottom and coconuts per day up the side. The curve starts at 105 coconuts with no fish and ends at 60 fish with no coconuts, and it bows outward.

The one graph is that bowed curve. The one calculation is its slope, read as an opportunity cost.

Worked example — the slope from 30 to 40 fish. Read two points off the island's schedule.

  1. At 30 fish, the island can gather 75 coconuts.
  2. At 40 fish, it can gather only 55 coconuts.
  3. The coconuts given up. 75 − 55 = 20 coconuts for those 10 fish.
  4. Per fish. 20 ÷ 10 = 2 coconuts per fish.

In words: each fish in that stretch costs the island 2 coconuts. Earlier stretches cost less, which is why the curve bows outward.

Now sort two points. The point (30, 75) is on the frontier, so it is efficient: the island cannot get more of one good without giving up some of the other. The point (30, 50) is inside the frontier, because the island could have 75 coconuts at 30 fish and has only 50. It is attainable, but some workers are idle or misused.

Misconception check. Students often think a point inside the frontier is "unattainable" because it is not on the line. It is tempting because the frontier looks like a boundary you must reach. The cure: inside means wasteful, not impossible. Only the points outside the curve, such as (40, 70), are out of reach, since the island can gather only 55 coconuts at 40 fish.

2. Read comparative advantage: the ratio table and the range

Two roommates, Wen and Rafael, share 6 chores. Wen is faster at every one of them. Should Wen do every chore? Week 2 said no, and the reason is opportunity cost.

Recall the campus food stand. In an hour, Amara makes 8 smoothies or 4 sandwiches, and Diego makes 3 smoothies or 3 sandwiches. Amara has the absolute advantage in both goods. Recall comparative advantage: the ability to make a good at a lower opportunity cost than another producer.

The one table is the opportunity-cost ratios, built one ratio at a time. The one check is whether a trading rate sits inside the range between them.

Worked example — who should make sandwiches? Find what one sandwich costs each person, in smoothies.

  1. Amara. 8 ÷ 4 = 2 smoothies per sandwich.
  2. Diego. 3 ÷ 3 = 1 smoothie per sandwich.
  3. The lower cost. Diego gives up less for a sandwich, so Diego has the comparative advantage in sandwiches, and Amara has it in smoothies.
  4. The range. A trade helps both only at a rate between 1 and 2 smoothies per sandwich.
  5. The pinned rate. 1.5 smoothies per sandwich sits inside that range, so both gain.

In words: Diego is slower at both foods, yet a sandwich costs him only half what it costs Amara in smoothies, so the stand makes more of both when Diego makes sandwiches. Week 2's trade of 10 sandwiches for 15 smoothies left Amara with 33 smoothies and 18 sandwiches and Diego with 15 and 14, more of both for both.

Misconception check. Students often give the comparative advantage to whoever is faster at everything. It is tempting because "advantage" sounds like "better." The cure: absolute advantage compares output; comparative advantage compares opportunity cost. Divide, one ratio at a time, and the lower ratio wins.

3. Solve the market: Qd = Qs and the shortage

Think of a concert merch table. If the shirts are priced too low, the line runs out before the shirts do; priced too high, boxes go home unsold. Somewhere between is a price that clears the table.

Recall the running market from Weeks 3 and 4. Market equilibrium is the price at which the quantity buyers want equals the quantity sellers want to sell. The one graph is two straight lines: demand sloping down and supply sloping up. The one calculation is to set them equal.

Worked example — solving Qd = Qs. Set demand equal to supply and solve.

  1. Set them equal. 90 − 10P = 10P − 30.
  2. Collect the P terms. 90 + 30 = 10P + 10P, so 20P = 120.
  3. Solve for P. P* = 120 ÷ 20 = 6 dollars.
  4. Find Q. Q* = 90 − 10 × 6 = 30 units per day, and supply gives 10 × 6 − 30 = 30 as well.

In words: at 6 dollars, buyers want exactly the 30 units sellers offer, so nothing is left over and no one is turned away.

Worked example — the shortage at 4 dollars. Read both sides at a price below the equilibrium.

  1. Buyers. Qd = 90 − 10 × 4 = 50 units per day.
  2. Sellers. Qs = 10 × 4 − 30 = 10 units per day.
  3. The gap. 50 − 10 = 40 units per day.

In words: at 4 dollars, buyers want 40 more units than sellers will offer, so the market has a shortage of 40 and the price is pushed back up toward 6.

Misconception check. Students often call the gap at a low price a surplus. It is tempting because the word "surplus" sounds like "a lot of something," and there are a lot of eager buyers. The cure: name what is left over. Below the equilibrium price, buyers are left over, so it is a shortage; above it, unsold units are left over, so it is a surplus.

4. Shift a curve: which curve, which way, and the new price

Suppose a town's paychecks grow and more people eat out. The price on the menu did not cause that change; something else did. Week 3 called that a change in demand, and Week 4 showed where the new price lands.

A shift needs three names: the curve, the direction, and the new price and quantity. A change in the good's own price never shifts a curve. It moves the market along one.

Worked example — a rise in income for a normal good. Shift demand and solve again.

  1. Which curve. Income changes what buyers want at every price, so demand shifts.
  2. Which way. For a normal good, more income means more is wanted at every price, so demand shifts right by 20 units, to Qd = 110 − 10P.
  3. Solve again. 110 − 10P = 10P − 30, so 20P = 140 and P = 7 dollars.
  4. The new quantity. Q = 110 − 10 × 7 = 40 units per day.

In words: demand shifted right, and the market moved up along the supply curve from 6 dollars and 30 units to 7 dollars and 40 units.

Misconception check. Students often write "demand rose" when the price fell and buyers bought more. It is tempting because more was bought. The cure: a lower price is a movement along the demand curve, a change in quantity demanded. Demand itself moves only when something other than the good's own price changes, such as income, a related good's price, tastes, expectations, or the number of buyers.

5. Measure elasticity: the midpoint formula and the revenue test

A transit agency wants more fare money. Should it raise fares? The answer depends on how strongly riders respond, and Week 5 measured that strength.

Recall that the price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. You compute it by the midpoint formula, dividing each change by the average of its two values. The one graph is a straight demand line. The one calculation is the midpoint formula, followed by the total-revenue test.

Remember that elasticity uses Dataset B, its own demand curve, Qd = 200 − 20P. It is not the running market.

Worked example — Dataset B from 4 to 6 dollars. Compute each percentage change on its midpoint.

  1. Quantities. At 4 dollars buyers want 120 units; at 6 dollars, 80.
  2. Quantity change. 80 − 120 = −40, over the average of 120 and 80, which is 100: −40 ⁄ 100.
  3. Price change. 6 − 4 = 2, over the average of 4 and 6, which is 5: 2 ⁄ 5.
  4. Divide. E_d = (−40 ⁄ 100) ÷ (2 ⁄ 5) = −1.0.
  5. Revenue test. TR = 4 × 120 = 480 dollars at 4 dollars and 6 × 80 = 480 dollars at 6 dollars.

In words: on this stretch the 40 percent fall in quantity exactly offsets the 40 percent rise in price, so demand is unit-elastic and the seller's revenue stays at 480 dollars either way.

Misconception check. Students often read elasticity off the slope. It is tempting because a steep line looks unresponsive. The cure: the slope of Dataset B is −20 units per dollar everywhere along the line, yet the elasticity changes from inelastic at low prices to elastic at high ones. Elasticity is a ratio of percentages, and slope is a ratio of units.

6. Measure surplus: the two triangles

Say you would have paid 30 dollars for a used jacket and you got it for 18. You walked away 12 dollars better off. Week 6 added up gains like that over every buyer and every seller.

Recall that consumer surplus is the area below the demand curve and above the price, and producer surplus is the area above the supply curve and below the price. The one graph is the equilibrium picture with two triangles shaded, one above the price line and one below it. The one calculation is one half times base times height, twice.

Read as values and costs, the running market's demand is P = 9 − Q ⁄ 10, so no one buys above 9 dollars. Its supply is P = 3 + Q ⁄ 10, so no one sells below 3 dollars.

Worked example — the surplus at the equilibrium. Each triangle has a base of 30 units.

  1. Consumer surplus. CS = 1⁄2 × 30 × (9 − 6) = 45 dollars per day.
  2. Producer surplus. PS = 1⁄2 × 30 × (6 − 3) = 45 dollars per day.
  3. Total surplus. TS = 45 + 45 = 90 dollars per day.

In words: buyers gain 45 dollars a day beyond what they pay, sellers gain 45 beyond their costs, and the 90 dollars together is the most this market can produce.

Misconception check. Students often multiply base by height and stop, computing the full rectangle. It is tempting because rectangles are the familiar area. The cure: the surplus region ends where the demand or supply line meets the price, so it is a triangle, and the one half belongs in front.

7. Run controls and taxes: the gap, the wedge, and the lost triangle

A city caps a price, or a state adds a tax to every unit sold. Week 7 ran both rules through the running market and asked what disappears.

Recall that a price ceiling is a legal maximum price that binds only below the equilibrium price, and a per-unit tax is a fixed amount collected on each unit sold. The deadweight loss is the total surplus that disappears because the quantity traded moves away from the efficient quantity. The one graph is the market with a line or a wedge added. The one calculation is the triangle of lost trades.

Worked example — a ceiling at 4 dollars. The ceiling binds, because 4 is below 6.

  1. The gap. Buyers want 50 units and sellers offer 10, a shortage of 40.
  2. What trades. Only 10 units trade, because a sale needs a seller.
  3. The lost triangle. At 10 units buyers value the last unit at 8 dollars and it costs sellers 4, so the deadweight loss is 1⁄2 × (30 − 10) × (8 − 4) = 40 dollars per day.

In words: the ceiling keeps 20 worthwhile trades from happening, and 40 dollars a day of value is lost.

Worked example — a 2-dollar tax on sellers. Supply shifts up by 2 dollars at every quantity.

  1. Supply with the tax. Qs = 10P − 50.
  2. Solve again. 90 − 10P = 10P − 50, so 20P = 140 and Pb = 7 dollars.
  3. The seller's price. Ps = 7 − 2 = 5 dollars.
  4. The quantity. Q = 90 − 10 × 7 = 20 units per day.
  5. Revenue. 2 × 20 = 40 dollars per day, a transfer to the government.
  6. The lost triangle. DWL = 1⁄2 × 2 × (30 − 20) = 10 dollars per day.
  7. The burden. Buyers bear 7 − 6 = 1 dollar and sellers bear 6 − 5 = 1 dollar.

In words: the tax drives a 2-dollar wedge between what buyers pay and what sellers keep, trade falls from 30 to 20 units a day, and 10 dollars a day of value disappears. The burden splits evenly here only because both curves change by 10 units per dollar; in Week 7's second market, buyers who found the good hard to do without bore 3 of a 4-dollar tax.

Misconception check. Students often assume whoever writes the check bears the tax, and they compute the loss as tax × quantity. Both are tempting because they follow the money. The cure: the burden follows how strongly each side responds to price, and 2 × 20 = 40 is the revenue, a transfer, while the loss is only the 10-dollar triangle.

8. Think at the margin: the café's extra hours

Back to the café on the quiet street. Its owner is not asking, "Is the café a good business?" The owner is asking, "Is the next hour worth it?" Economists call that thinking at the margin: deciding a choice one extra unit at a time. You weigh what one more unit would add against what it would cost, instead of judging the whole total at once.

The extra benefit of one more unit is its marginal benefit, written MB. The extra cost of that same unit is its marginal cost, written MC. Here MB is the extra revenue from one more open hour, and MC is the staff and power that hour uses. Week 9 builds marginal cost from a full cost table; this week you only need the cost of one more hour.

  • Marginal-benefit and marginal-cost rule — do one more unit of an activity while its extra benefit is at least its extra cost, and stop at the first unit whose extra cost is larger than its extra benefit.
  • Net gain — the extra benefit of a unit minus its extra cost; added up over the units chosen, it is how much better off the choice leaves you.

Dataset U is the café's evening, built for this course. The extra revenue from the 1st to the 5th extra hour is 60, 45, 30, 20, and 10 dollars. Each extra hour costs 25 dollars.

The café's extra evening hours: extra revenue, extra cost, and net gain of each hour, in dollars (illustrative)
Extra hour MB (extra revenue) MC (extra cost) MB − MC
1st 60 25 35
2nd 45 25 20
3rd 30 25 5
4th 20 25 −5
5th 10 25 −15

Worked example — how many extra hours? Test each hour in order.

  1. Hour 1. 60 ≥ 25, so it passes, with a net gain of 60 − 25 = 35 dollars.
  2. Hour 2. 45 ≥ 25, so it passes, with a net gain of 45 − 25 = 20 dollars.
  3. Hour 3. 30 ≥ 25, so it passes, with a net gain of 30 − 25 = 5 dollars.
  4. Hour 4. 20 < 25, so it fails; it would change the net gain by 20 − 25 = −5 dollars.
  5. The choice. Open 3 extra hours.
  6. The net gain. 35 + 20 + 5 = 60 dollars a night.
  7. A check. Extra revenue is 60 + 45 + 30 = 135 dollars, extra cost is 3 × 25 = 75 dollars, and 135 − 75 = 60.

In words: the café stays open 3 extra hours and ends each night 60 dollars better off; a 4th hour would cut that to 55.

Notice the shape. The early hours earn a lot, and each later hour earns less. That pattern is common, and it is why the rule has a stopping point. You have met this idea before without its name. In Week 6, the used-bicycle market paired buyers and sellers one trade at a time, with gains of 80, 50, 20, and then −20 dollars, and it stopped at three trades. That is the margin rule at work: make the next trade while it is worth at least what it costs.

Misconception check. Students often keep the café open "as long as an hour brings in money." It is tempting because the 4th hour still brings in 20 dollars. The cure: an hour is worth adding only if its extra benefit is at least its extra cost. The 4th hour brings in 20 but costs 25, so it makes the café 5 dollars worse off.

9. Leave out the sunk cost: the bridge to the firm weeks

Imagine you bought a nonrefundable 40-dollar ticket to a play, and on the night you feel sick. The 40 dollars is gone whether you go or stay home. The only question left is which evening you would enjoy more from here on.

That spent money has a name. A sunk cost is money or time already spent that cannot be recovered whatever you decide next; because it is the same under every option, it does not change which option is best.

Worked example — the café's rent. Ask whether the rent changes any comparison.

  1. The rent is paid. The café paid its rent before the evening began, and closing early will not return it.
  2. It is the same at every choice. The rent is the same whether the café opens 0 extra hours or 5.
  3. It changes no comparison. Each hour's MB − MC is unchanged, so the hours that passed still pass.
  4. The choice stands. The café still opens 3 extra hours.

In words: whatever the rent was, it belongs to every option equally, so it cannot tip the decision about tonight's hours.

This habit carries the rest of the course. From Week 9 on, a firm decides how much to make by asking what one more unit adds against what it costs, and it sets aside what is already spent. Here is a caveat, too: a sunk cost still counts when you add up how a whole year went; it only drops out of the decision about the next hour.

Pause and think. Choose one option and write a few sentences.

(a) Describe a time someone kept going with a plan mainly because of money already spent, and say what the margin rule would ask instead.

(b) Describe a choice you make in steps, such as hours worked, and say where its extra benefit falls below its extra cost.

Misconception check. Students often think a big past expense is a reason to keep going: "We already paid for it, so we have to use it." It is tempting because walking away feels like wasting the money. The cure: the money is spent either way. Past spending is not a reason to keep going, and it is not a reason to stop; only what comes next counts.

Key terms

  • thinking at the margin — Deciding a choice one extra unit at a time: you ask what one more hour, one more unit, or one more step would add and what it would cost, instead of judging the whole total at once. (first used: 8. Think at the margin: the café's extra hours)
  • marginal benefit — The extra benefit from one more unit of an activity, such as the extra revenue a shop earns by staying open one more hour. (first used: 8. Think at the margin: the café's extra hours)
  • marginal-benefit and marginal-cost rule — The decision rule that says to do one more unit of an activity while the extra benefit of that unit is at least its extra cost, and to stop at the first unit whose extra cost is larger than its extra benefit. (first used: 8. Think at the margin: the café's extra hours)
  • net gain — The extra benefit of a unit minus its extra cost; added up over every unit chosen, it is how much better off the choice leaves the decision maker. (first used: 8. Think at the margin: the café's extra hours)
  • sunk cost — Money or time already spent that cannot be recovered whatever you decide next; because it is the same under every option, it does not change which option is best. (first used: 9. Leave out the sunk cost: the bridge to the firm weeks)

Summary

  • The frontier's slope is an opportunity cost; inside points are attainable but wasteful.
  • Comparative advantage goes to the lower opportunity cost, not the faster producer.
  • Equilibrium solves Qd = Qs; below it is a shortage, above it a surplus.
  • A shift names the curve, the direction, and the new price and quantity.
  • Elasticity uses the midpoint formula; it is not the slope.
  • Consumer and producer surplus are triangles, each one half times base times height.
  • A tax's burden follows responsiveness, and its revenue is not deadweight loss.
  • Do one more unit while its marginal benefit is at least its marginal cost.
  • A sunk cost is the same under every option, so it never decides the next step.

Check your understanding

Work these before looking at the answers — they are ungraded, and the answers (with reasoning) are at the bottom of the page.

  1. A small farm can grow these weekly combinations of crates of tomatoes and crates of beans: (0, 48), (10, 44), (20, 36), (30, 24), and (40, 0). What do the 10 crates of tomatoes from 20 to 30 cost, per crate? Is (20, 30) on, inside, or outside the frontier?
  2. A city's bike-share day passes have demand Qd = 120 − 5P and supply Qs = 15P − 40, with P in dollars and quantities in passes per day. Find the equilibrium. Then a festival brings more visitors, and demand becomes Qd = 140 − 5P. Name the curve, the direction, and the new price and quantity.
  3. A bakery raises the price of a sourdough loaf from 10 to 14 dollars, and daily sales fall from 60 loaves to 40. Compute the price elasticity of demand by the midpoint formula, say whether demand is elastic or inelastic on this stretch, and check your answer with the total-revenue test.
  4. A print shop can run extra batches of posters on a slow afternoon. The extra revenue from the 1st to the 4th batch is 90, 70, 50, and 30 dollars, and each batch costs 45 dollars in paper and ink. Last month it paid 200 dollars for the printer, which it cannot return. How many batches should it run, and what is the net gain? Does the printer's price change the answer?
  5. A market for movie-night tickets has demand Qd = 100 − 10P and supply Qs = 30P − 60. A 2-dollar tax is collected from sellers, so supply becomes Qs = 30P − 120. Find the price buyers pay, the price sellers keep, the quantity, the revenue, and the deadweight loss. Which side bears more of the tax, and why?

Answers (worked reasoning — read after attempting)

  1. From 20 to 30 crates of tomatoes, beans fall from 36 to 24. The farm gives up 36 − 24 = 12 crates of beans for 10 crates of tomatoes, or 12 ÷ 10 = 1.2 crates of beans per crate of tomatoes. The point (20, 30) is inside the frontier, because the farm could grow 36 crates of beans with 20 crates of tomatoes and plans only 30. It is attainable but wasteful, not impossible.
  2. Set 120 − 5P = 15P − 40, so 160 = 20P and P = 8 dollars, with Q = 120 − 5 × 8 = 80 passes per day. The festival changes something other than the pass's own price, so demand shifts right, by 20 passes at every price. Then 140 − 5P = 15P − 40, so 20P = 180 and P = 9 dollars, with Q = 140 − 5 × 9 = 95 passes per day. Demand shifted right, and the market moved up along supply from 8 dollars and 80 passes to 9 dollars and 95 passes.
  3. The quantity change is (40 − 60) ⁄ 50 = −20 ⁄ 50 = −0.4, and the price change is (14 − 10) ⁄ 12 = 4 ⁄ 12. So E_d = −0.4 ÷ (4 ⁄ 12) = −1.2, and since 1.2 is greater than 1, demand is elastic on this stretch. The revenue test agrees: revenue falls from 10 × 60 = 600 dollars to 14 × 40 = 560 dollars when the price rises.
  4. The net gains are 90 − 45 = 45, 70 − 45 = 25, 50 − 45 = 5, and 30 − 45 = −15 dollars. The first three batches pass the rule and the 4th fails, because 30 is less than 45. So the shop runs 3 batches, for a net gain of 45 + 25 + 5 = 75 dollars. The printer's 200 dollars is a sunk cost, the same whatever the shop runs, so it does not change the answer.
  5. Before the tax, 100 − 10P = 30P − 60, so 40P = 160, P = 4 dollars, and Q = 60 tickets. With the tax, 100 − 10P = 30P − 120, so 40P = 220 and buyers pay 5.5 dollars; sellers keep 5.5 − 2 = 3.5 dollars, and Q = 100 − 55 = 45 tickets. Revenue is 2 × 45 = 90 dollars, and the deadweight loss is 1⁄2 × 2 × (60 − 45) = 15 dollars. Buyers bear 5.5 − 4 = 1.5 dollars and sellers bear 4 − 3.5 = 0.5 dollars. Buyers bear more because quantity demanded changes by only 10 tickets per dollar, versus 30 for quantity supplied, a 3-fold difference.

Next up in this module: the Readings & Resources page, the practice set, the discussion, and the midterm — and next week a cost table puts the marginal-benefit and marginal-cost rule to work.

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