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* When Q = 1, the height of the demand curve is $300, which is Flea’s willingness to pay, or how much he values an iPod. At any price higher than $300, Flea leaves the market; hence, at Q = 1, Flea is the marginal buyer. When Q = 2, the height of the demand curve is $250, which is Anthony’s willingness to pay, or how much he values an iPod. At any price higher than $250, Anthony leaves the market; hence, at Q = 2, Anthony is the marginal buyer. And so forth. The lesson here is summarized in the text on the right side of the screen: At each Q, the height of the D curve tells you the marginal buyer’s willingness to pay, or how much that buyer values the good. * The area of any rectangle equals base times height. For the green rectangle on this slide, base = 1 height = $300 – 260 = $40 area = 1 x $40 = $40 * The entire green area (total CS) can be divided into two rectangles: The first (and leftmost) represents Flea’s CS. It has a height of $80 and a width of 1. The second represents Anthony’s CS. It has a height of $30 and a width of 1. The sum of these two rectangular areas equals total CS. * The text in the yellow box summarizes the lesson of the two preceding slides. * In “normal” or edit mode, the text appears to overlap with the vertical axis label. Don’t worry – in “Slide Show” or presentation mode, the axis labels disappear before the text appears. * Some students mistake the upper vertical intercept ($60 in this example) for the height of the blue triangle: they forget to subtract off the height of the bottom of the triangle from the height of the top of the triangle. So, the first one or two times, it might be worthwhile to show them how to find the height of the triangle. * The book shows how a lower price increases CS. * The material on cost, producer surplus, and the supply curve is analogous to the material earlier on WTP, consumer surplus, and the demand curve. Therefore, this section provides a bit less detai
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