a. If only two firms exists in the market and they act competitively, find the equilibrium price and quantity, and calculate producer and consumer surplus. If you know firms earn zero profit, what must their fixed cost be?  b. Calculate the elasticities of market supply and market demand at the equilibrium point. Which one is more elastic

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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.