Chapter 7, Problem 83RE

(a)

To determine

To plot: Graph the systems of inequalities representing the consumer surplus and producer surplus and demand equations

Explanation of Solution

Given:

The demand is:

  $p=160–0.0001x.$

The supply is:

  $p=70–0.0002x$ ..

The plot for the demand-supply system is given as follows:

  

(b)

To determine

To find: Consumer surplus and producer surplus

Answer to Problem 83RE

Explanation of Solution

Given:

The demand is:

  $p=160–0.0001x.$

The supply is:

  $p=70–0.0002x$ .

Consumer surplus value is given by area of the consumer surplus region.

Area of the triangle= $\frac{1}{2}bh$

So,

Producer surplus= $\frac{1}{2}\left(300000\right)\left(160–130\right)$

  $\begin{array}{l}=150000.30\hfill \\ =\$4,500,000\hfill \end{array}$

Producer surplus is given by the area under producer surplus region.

Area of the triangle= $\frac{1}{2}bh$

So,

Producer surplus= $\frac{1}{2}\left(300000\right)\left(130–70\right)$

  $\begin{array}{l}=150000.60\hfill \\ =\$9,000,000\hfill \end{array}$