Question
Asked Oct 26, 2019
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Calculate consumer surplus and producer surplus at the equilibrium.

 

Price
Supply
24
A
22
20
H
18
F
16
14
I
12
Demand
10
8
++
5 6 7
10 11 uatity
3
4
8
9
00
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Price Supply 24 A 22 20 H 18 F 16 14 I 12 Demand 10 8 ++ 5 6 7 10 11 uatity 3 4 8 9 00

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Expert Answer

Step 1

The consumer surplus is the difference between the highest price a consumer is willing to pay for a good and the actual market price (equilibrium price) of the good.

Graphically consumer surplus is the area that lies below the demand curve and above the price line.

The producer surplus is the difference between the actual market price of a good and the lowest price a producer would be willing to accept for a good. Graphically producer surplus is the area that lies below the price line and above the supply curve.

The shaded area shows the consumer and producer surplus.

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Price Consumer surplus Producer surplus P" Quantity

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Step 2

Area of triangle AFB in the given graph (in question) represent the consumer surplus (CS). Which is equal to:

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xpricex quantity CS ==x 6x6 2 18

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Step 3

Area of triangle DFB in the given graph (in question) repr...

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1 PS = х price x quantity 2 1 хбх12 2 =- = 36

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