Prices+including+full+economic+price

=__**Prices including full economic price**__= (Topic #9: Eric Nault, Dennis Booth, Jason Gornto)


 * __Descriptions:__**

The dollar amount paid to a firm under a price ceiling, plus the nonpecuniary price. Nonpecuniary price, under a price ceiling, is the amount of money a consumer is willing to pay above and beyond the price ceiling. This price is not paid in a dollar amount but rather an opportunity cost. To find this value with a negative sloping demand curve and a positive sloping supply curve, find the intersection of the price ceiling (Pc) and supply curve. At this intersection point you can find the quantity (x-axis) supplied under the price ceiling and extend a vertical line until it intersects the demand curve. This intersection point is the price consumers are willing to pay (Pf). The difference between Pf and Pc is the nonpecuniary price. When the nonpecuniary price is added to the price ceiling (Pc) this gives the full economic price. The mathematical expression for this is:
 * Full Economic Price:**


 * Full economic price = Dollar price (Pc) + Non-pecuniary price (Pf - Pc)**

A great example of full economic price at work today is the price of a concert ticket when each consumer pays the same price but seats are issued at a first come first serve basis on the day of the concert. In this real world example, consumers are surely willing to pay for premium seating but the price ceiling has created a "waiting" situation. We have seen consumers like this that are camped out days ahead of time to reserve a great seat at a concert. These consumers that wait days in line are likely to have a lower opportunity cost (basically nothing better to do) than those who chose to not wait in line. In this example the full economic price is the original price of the ticket plus the cost of waiting in line.
 * __Example:__**

When a market is in equilibrium the point at which Supply and Demand meet determines price. The price can be affected by income, elasticity of demand, and competition. Sometimes firms choose to charge less than the profit-maximizing price for competitive or strategic reasons.
 * Prices:**

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__External links and references:__
[|California State University - College of Business and Economics] Baye, Micheal R. __Managerial Economics and Business Strategy__. 2006, pp. 54-58 [|Economist.com]

Related Wikispaces Price Subjects: Pricing Strategies Price Ceiling Price Floor


 * __Sample Test Questions:__**

Full Economic Price is the dollar amount paid to a firm under a price ceiling, minus the nonpecuniary price. a) True b) False
 * Question 1:**

Answer is: **b) False. It is plus the nonpecuniary price. The calculation is: Full economic price = Dollar price (Pc) + Non-pecuniary price (Pf - Pc)**

The difference between the price ceiling and the price consumers are willing to pay is: a) the price surplus b) the price shortage c) the pecuniary price d) the nonpecuniary price
 * Question 2:**

Answer is: **d) the nonpecuniary price**

Full economic price = a) Pf / Pc b) Pc + (Pf - Pc) c) Pc + (Pf x Pc) d) None of the above
 * Question 3:**

Answer is: **b) Pc + (Pf - Pc). Dollar price (Pc) + Non-pecuniary price (Pf - Pc)**

When a market is in equilibrium the point at which Supply and Demand meet determines: a) Surplus b) Price c) elasticity d) all of the above Answer is **b) Price**
 * Question 4:**

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