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Consumer Surplus & Producer Surplus

 
 
kzhou
 
Reply Thu 8 Jan, 2015 05:57 pm
I was thinking that if the producer could set price in a way that for example, first item cost 10, second cost 8, third cost 6, so three cost 24. Will this help the producer get all consumer's surplus?
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Type: Question • Score: 1 • Views: 548 • Replies: 3
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somewhatsolved
 
  1  
Reply Thu 8 Jan, 2015 07:53 pm
@kzhou,
Confusion on terms but I think that I get the jist of it and from there I say they already do. Just not retail to public consumer (at least not often).

Okay here is how I'll explain and I will try to give an example, if you give me a product I could help more.

The item maker (who ever makes the product ex: a carpenter makes a dresser) will send the item to the retailer at a price consisting of the factors of: materials, tools, repair, living, labor, and mark up. The carpenter will actually have little wiggle room for this one dresser because of the way he calculated the costs. However, if he sales that dresser as a group of 100 dressers to the retailer then his costs actually go down per dresser. He'll obtain the materials at reduced cost do to bulk, the tools would be purchased once by the first dresser (stating that they are all an exact replica), living costs will be reducable depending on the economy of the sale, labor is reducable from the get go and along with his mark up made almost all of the original wiggle room.

However, you won't actually see any of these reductions in the store and the retailer will add in its own percieved costs, labor, transportation, mark up and they'll add SUPPLY V. DEMAND. While all along leaving the original price of making just one dresser.

Here is a reduction scale. d= dresser and p=price and r=reduction 1d=0r 10d=1/10p 20d=1/15p so 100d=30%p/40%p these are all hypothisized and unique to this fake senerio.

but Walmart wouldn't buy just 1 or 100 they buy it by the 10,000s and the reductions would litterally be off the scale.

Now, you have to realize the above was a highly hypothetical senerio and mathmatics so for ligit physical evidence I suggest looking up wood working materials. They reguarly sell their materials (not machines) at bulk prices. Use an offical site and look at wood, pen making kits, or similar. You'll see that it is true.

The following is a link I pulled from a random woodworking site.

http://go.rockler.com/catalog.cfm

Also food for thought free shipping from internet shopping. They make a deal to send your purchases after you have spent so much on your purchases.

P.S. RENEMBER THAT IF YOU GIVE ME PRODUCT NAME, DISCRIPTION, AND/OR DETAILS I CAN BE OF BETTER HELP.
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Kolyo
 
  1  
Reply Thu 8 Jan, 2015 08:35 pm
@kzhou,
Only if the producer is a monopolist or part of a cartel.
In perfectly competitive markets,
producers have no control over the price and can't engage in price fixing.
They are "price takers".

If you're reading an intro text on Microeconomics,
keep reading and you'll get to that part.
somewhatsolved
 
  1  
Reply Fri 9 Jan, 2015 03:02 am
@Kolyo,
I seriously have to disagree.

The producer is the first seller, of the finished product. He however must get the materials for the product. They must either gather them by them selves (which doesn't happen on large scale) you get the jist.

So basically the first producer I earlier stated isn't the first the where the chain starts. You have the gathers to obtain the materials then the people who then break them down into usable items.

insert image of tree.

insert image of 2 by 4.

insert image of dresser.

I worked for retail before. If you doubt me go to walmart third shift. Find someone who will talk to you and just ask. Third shift doesn't care also I posted links.

P.S. how do I insert images.
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