1. Suppose that the smartphone market has the demand equation of P= 1,200 - 3.5Qd and the supply equation of  P= 450 + 2.5Qs. a. Find the equilibrium price and equilibrium quantity for this market? b. Draw a graph to show this market and compute for consumer surplus, producer surplus, and market surplus.

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Market Surplus and Shortage Analysis

In everyday language, a “surplus” indicates that there is an excess of something, while a “shortage” means that there is a scarcity of it. In economics, “market surplus” refers to the condition where the quantity of a certain good more available than what is required or “demanded” by the market. In the same way, a “market shortage” refers to the condition where the quantity of a certain good is less available than what is “demanded” by the market. If quantity in demand is written as Qd and quantity that is supplied is written as Qs, then, the condition Qs > Qd indicates market surplus and condition Qd > Qs indicates market shortage.