Sample Economic Research Paper on Consumer surplus

Consumer surplus

It is a situation where a person is ready to buy at a higher price he actually pays. Total amount paid for the goods will be equal to the actual satisfaction that will be derived (Carbaugh, 2011). Consider a consumer deficit; it implies that the consumer will not afford the goods a he is willing to pay less than the actual price of the goods. Imposing a surplus tax on sales would imply that those who consume many of the goods would pay more taxes. These proceeds would later be used to compensate the consumers who cannot afford the goods and they will have a chance to buy some of them. The surplus tax on the side of consumption will have different effects on the two types of consumers; those willing to pay more than the actual prices and those who cannot afford commodities.

Those who are ready to buy the commodities at higher prices will continue to buy more. This is because they are still able to afford them even when the surplus tax makes prices to rise. As they continue to buy more, their indifference curve move higher and thus they gain more satisfaction. When they consume more, it implies that more sales taxes will be collected. These proceeds will enable those who cannot afford the goods to have more opportunities to buy thus, consumption rises (Hall & Lieberman, 2010). As consumption increases, production shoots up. This is because ceteris paribus, the demand is high and thus suppliers and firms will produce more to meet the high demands. For instance, if the government were to impose a surplus tax on coffee, consumers willing to pay more than what they previously paid would still consume it giving those who could not afford a chance to buy, thus demand increases (Hirshleifer, Glazer & Hirshleifer, 2005). This will make coffee farmers pick more of it to sell to the factories, which will process more coffee to supply to the market.

Question 5

When the price of E- Readers drops from $ 60 by 50%, the new price becomes $50. Therefore, more people will buy E-readers and the demand of the E-books will go up. The demand curve will shift to the right because the price of the complement good, which is the E-readers, has reduced. The quantity demanded changed to higher numbers by 20%. The new demand table will be as follows:

Price/E-Book Quantity Demanded  Quantity supplied
$60          4800                       10000
$50           6000                        9500

The demand curve will shift to the right with the supply curve being constant as illustrated:

 

 

 

 

 

Prices                                                                                                              S1S1

 

P2 $60                                                     E1          E2

P1   $50

 

D2D2

D1D1

 

 

4800        6000

Q1              Q2

Quantity

 

References

Carbaugh, R. J. (2011). International economics. Mason, OH: South-Western Cengage Learning.

Hall, R. E., & Lieberman, M. (2010). Microeconomics: Principles and applications. Mason, OH: South-Western, Cengage Learning.

Hirshleifer, J., Glazer, A., & Hirshleifer, D. A. (2005). Price theory and applications: Decisions, markets, and information. New York: Cambridge University Press.