Equilibrium Lab Report
Equilibrium Lab Report
Data Collection:
1. What card did you have? K=13
What was your trading partner’s card? Q=12
2a) . At what price did you eventually trade? 12 Your surplus: -1
2b) If you didn’t trade, why not?
Economic Relevance
3. What is the predicted equilibrium? How does the most common trading price in your lab session compare to the equilibrium price? The predicted equilibrium was (13, 7).
4. Who was able to stay in the market? Who was shut out? In what ways did this make the market efficient or inefficient? The people who were able to stay in the market were low seller and high buyers. The people that were shut out of the market were the high sellers and low buyers. The market is gonna reward low cost producers to allow them to make a deal, but punish high cost producers with little to no surplus.
Policy Application
5. Is the market a “good” way to allocate resources? Why or why not? Support your answer with reference to the outcome of the experiment.
For the consumer, the price they are willing to pay measures the benefit or utility that the consumers expect to receive from consuming the last unit. Consumers only buy something if it is worth as much as or more than the other things that the same money could buy. So if the price of something is greater than the benefit they get from consuming it, they will not buy it.
For the producer or seller, the price they are willing to accept measures the cost of the resources involved in the production including the supplier's own time and effort. Thus when a market is in equilibrium, marginal benefit equals marginal cost equals price. The benefit received from the last unit consumed will exactly equal the resource cost of producing that unit. This fulfils the condition for allocative efficiency. Competing producers chasing maximum profits will always choose the least cost combination of factors to produce a given output. So yes the market is “good” way to allocate resources from what
Data Collection:
1. What card did you have? K=13
What was your trading partner’s card? Q=12
2a) . At what price did you eventually trade? 12 Your surplus: -1
2b) If you didn’t trade, why not?
Economic Relevance
3. What is the predicted equilibrium? How does the most common trading price in your lab session compare to the equilibrium price? The predicted equilibrium was (13, 7).
4. Who was able to stay in the market? Who was shut out? In what ways did this make the market efficient or inefficient? The people who were able to stay in the market were low seller and high buyers. The people that were shut out of the market were the high sellers and low buyers. The market is gonna reward low cost producers to allow them to make a deal, but punish high cost producers with little to no surplus.
Policy Application
5. Is the market a “good” way to allocate resources? Why or why not? Support your answer with reference to the outcome of the experiment.
For the consumer, the price they are willing to pay measures the benefit or utility that the consumers expect to receive from consuming the last unit. Consumers only buy something if it is worth as much as or more than the other things that the same money could buy. So if the price of something is greater than the benefit they get from consuming it, they will not buy it.
For the producer or seller, the price they are willing to accept measures the cost of the resources involved in the production including the supplier's own time and effort. Thus when a market is in equilibrium, marginal benefit equals marginal cost equals price. The benefit received from the last unit consumed will exactly equal the resource cost of producing that unit. This fulfils the condition for allocative efficiency. Competing producers chasing maximum profits will always choose the least cost combination of factors to produce a given output. So yes the market is “good” way to allocate resources from what