Market Equilibrium Analysis for Artisanal Porcelain Sloths

Option 1 The graph below shows the market for artisanal porcelain sloths. (a) What is the equilibrium price and quantity of the sloths? Mjjj The equilibrium price of the sloths is $5 and the quantity 3. (b) What is the total revenue for businesses at the equilibrium point? EQ Price * EQ Quantity $5*3=$15 (c) Calculate the producer and consumer surplus at equilibrium. Show your work. (d)Consumer Surplus = [(8 - 5) * 3] / 2 = 9 / 2 = 4.5

(e)Producer Surplus = [(5 - 0) * 3] / 2 = 15 / 2 = 7.5 (f) Consumer Surplus = [(8 - 5) * 3] / 2 = 9 / 2 = 4.5 (g)Producer Surplus = [(5 - 0) * 3] / 2 = 15 / 2 = 7.5 (h)Consumer Surplus = [(8 - 5) * 3] / 2 = 9 / 2 = 4.5 (i) Producer Surplus = [(5 - 0) * 3] / 2 = 15 / 2 = 7.5

(j) Consumer Surplus = [(8 - 5) * 3] / 2 = 9 / 2 = 4.5 (k)Producer Surplus = [(5 - 0) * 3] / 2 = 15 / 2 = 7.5 Producer Surplus: (5-0) *3=15/2= 7.5 Consumer Surplus: (8-5) *3=9/2= 4.5 (d) Who is benefiting more, or has a greater surplus, at equilibrium, consumers or producers? Explain. The group with the greater surplus in this case the producer, is benefiting more as the producer surplus is 7.5 and the consumer cost being only 4.5 (e) The porcelain sloths decrease in price. They are a substitute good for glass llama sculptures. Draw a correctly labeled graph of the market for glass llama sculptures before and after the

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sloths decreased in price. (f) Shade the producer surplus after the change described in part (e).

(g) What would happen to the equilibrium price and quantity for llama sculptures because of the price decrease of the porcelain sloths? Explain. Both the equilibrium price and the quantity for llama sculptures decrease because of the price decrease of the porcelain sloths. This is because if products in competition are decreasing in price it will cause the product to decrease in price and in the quantity demanded. (h) The price of the glass used to make the llama sculptures decreases. On a new graph, illustrate the market for glass llama sculptures before and after the glass decreased in price.

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(i) If the price decrease for glass happened at the same time as the price decrease for porcelain sloths, how would the equilibrium price and quantity for the glass llamas change? Explain. There would still be an increase in demand for glass llama sculptures even if the price decrease for glass occurred at the same time as the price decrease for porcelain sloths. Given the decreased price of glass and the increased demand, producers would increase production and raise the price. Equilibrium price and amount supplied will increase because of this.

2.06 Market Equillibrium

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