The consumer surplus , total surplus and deadweight loss .

Question

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Answer 1

Question

Chapter 4, Problem 4P

Subpart (a):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (a):

Expert Solution

Explanation of Solution

Figure -1 illustrates the market equilibrium that is arrived at equilibrium between the demand and supply curve.

Macroeconomics, Chapter 4, Problem 4P

In figure -1 panel (a) and (b), the horizontal axis measures the quantity of bags and the vertical axis measures the price per bag. The curve ‘S’ represents the supply and the curve ‘D’ represents the demand.

The inverse demand function can be derived as follows:

Price=PriceAt point 'a'+Equilibrium price−PriceAt point 'a'Q1−QuantityAt point 'a'(Quantity)=85+45−8520−0(Quantity)=85−2(Quantity)

The inverse demand functions of price=85−2(Quantity) .

The inverse supply curve can be calculated as follows:

Price=PriceAt point 'c'+Equilibrium price−PriceAt point 'c'Q1−QuantityAt point 'c'(Quantity)=5+45−520−0(Quantity)=5+2(Quantity)

The inverse supply functions of price=5+2(Quantity) .

The inverse demand function and supply functions reveal that the producer willing price is $5 and the consumer willing price is $85. The equilibrium price is $45. The total surplus can be calculated as follows:

Total surplus=12(Consumer willing price−Producer willing price)×Equilibrium quantity=12(85−5)×20=(80)×10=800

The total surplus is $800.

The consumer surplus can be calculated as follows:

Consumer surplus=12(Consumer willing price−Equilibrium price)×Equilibrium quantity=12(85−45)×20=(40)×10=400

The consumer surplus is $400.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart (b):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (b):

Expert Solution

Explanation of Solution

The consumer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output to the inverse demand function.

Price=85−2(15)=85−30=55

The consumer new willing price is $55.

The producer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output into the inverse supply function.

Price=5+2(15)=5+30=35

The producer’s new willing price is $35.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(55−35)×(20−15)=12(20)×(5)=50

The deadweight loss is $50.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−50=750

The total surplus is $750.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart c):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart c):

Expert Solution

Explanation of Solution

The consumer willing price at Q3 level of output (27 units) can be calculated by substituting the Q3 level of output to the inverse demand function.

Price=85−2(27)=85−54=31

The consumer new willing price is $31.

The producer willing price at Q3 level of output (127 units) can be calculated by substituting the Q3 level of output to the inverse supply function.

Price=5+2(27)=5+54=59

The producer new willing price is $59.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(31−59)×(20−27)=12(−28)×(−7)=98

The deadweight loss is $98.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−98=702

The total surplus is $702.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

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Students have asked these similar questions

For all questions, refer to the graph on the reverse side. Use this graph for 1 – 4. The graph represents the market for coffee. Estimation may be necessary, so show work. Name a good that will see increased sales due to the tariff or quota above. Name a good besides coffee that will see decreased sales due to the tariff or quota above. Suppose that 1 US$ = 1.5 South African Rand. Also, suppose that the representative good, peanut butter, is $3 per jar in the US and 4 Rand per jar in SA. How will this situation affect the exchange market for U.S. dollars? Explain/show the effect(s) of these prices. Include the initial effect(s), the market adjustment(s), and the final result(s) on equilibrium.

Consider the market for coffee in the small, isolated country of Krakozhia. Within Krakozhia, the domesticdemand for coffee is:Qd = 500 − 2pand the domestic supply of coffee is:Qs = −150 + 3p(a) Suppose Krakozhia is closed to trade with the rest of the world. Determine the equilibrium price andquantity.(b) Draw a graph showing the domestic supply and demand from (a). Label all axes and curves and markout intercepts and equilibrium values. Shade and label areas for the consumer and producer surplus.(c) Calculate the consumer, producer, and total surplus. from (a).(d) Suppose Krakozhia is open to trade and the world price is 150. Determine the domestic quantity supplied,domestic quantity demanded, and the quantity exported.(e) Draw a graph showing the domestic supply and demand and world price from (d). Label all axes andcurves and mark out intercepts and relevant values. Shade and label areas for the consumer and producersurplus.(f) Calculate the consumer, producer, and total surplus…

Q2. "Since all market allocations are Pareto efficient there can be no justification for any kind of government intervention as it would imply that the free market is being interfered with"- Comment. (6) (Your answer to Q2 should not exceed more than one paragraph). please give workings.

Answer 2

Question

Chapter 4, Problem 4P

Subpart (a):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (a):

Expert Solution

Explanation of Solution

Figure -1 illustrates the market equilibrium that is arrived at equilibrium between the demand and supply curve.

Macroeconomics, Chapter 4, Problem 4P

In figure -1 panel (a) and (b), the horizontal axis measures the quantity of bags and the vertical axis measures the price per bag. The curve ‘S’ represents the supply and the curve ‘D’ represents the demand.

The inverse demand function can be derived as follows:

Price=PriceAt point 'a'+Equilibrium price−PriceAt point 'a'Q1−QuantityAt point 'a'(Quantity)=85+45−8520−0(Quantity)=85−2(Quantity)

The inverse demand functions of price=85−2(Quantity) .

The inverse supply curve can be calculated as follows:

Price=PriceAt point 'c'+Equilibrium price−PriceAt point 'c'Q1−QuantityAt point 'c'(Quantity)=5+45−520−0(Quantity)=5+2(Quantity)

The inverse supply functions of price=5+2(Quantity) .

The inverse demand function and supply functions reveal that the producer willing price is $5 and the consumer willing price is $85. The equilibrium price is $45. The total surplus can be calculated as follows:

Total surplus=12(Consumer willing price−Producer willing price)×Equilibrium quantity=12(85−5)×20=(80)×10=800

The total surplus is $800.

The consumer surplus can be calculated as follows:

Consumer surplus=12(Consumer willing price−Equilibrium price)×Equilibrium quantity=12(85−45)×20=(40)×10=400

The consumer surplus is $400.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart (b):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (b):

Expert Solution

Explanation of Solution

The consumer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output to the inverse demand function.

Price=85−2(15)=85−30=55

The consumer new willing price is $55.

The producer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output into the inverse supply function.

Price=5+2(15)=5+30=35

The producer’s new willing price is $35.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(55−35)×(20−15)=12(20)×(5)=50

The deadweight loss is $50.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−50=750

The total surplus is $750.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart c):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart c):

Expert Solution

Explanation of Solution

The consumer willing price at Q3 level of output (27 units) can be calculated by substituting the Q3 level of output to the inverse demand function.

Price=85−2(27)=85−54=31

The consumer new willing price is $31.

The producer willing price at Q3 level of output (127 units) can be calculated by substituting the Q3 level of output to the inverse supply function.

Price=5+2(27)=5+54=59

The producer new willing price is $59.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(31−59)×(20−27)=12(−28)×(−7)=98

The deadweight loss is $98.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−98=702

The total surplus is $702.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

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Answer 3

Question

Chapter 4, Problem 4P

Subpart (a):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (a):

Expert Solution

Explanation of Solution

Figure -1 illustrates the market equilibrium that is arrived at equilibrium between the demand and supply curve.

Macroeconomics, Chapter 4, Problem 4P

In figure -1 panel (a) and (b), the horizontal axis measures the quantity of bags and the vertical axis measures the price per bag. The curve ‘S’ represents the supply and the curve ‘D’ represents the demand.

The inverse demand function can be derived as follows:

Price=PriceAt point 'a'+Equilibrium price−PriceAt point 'a'Q1−QuantityAt point 'a'(Quantity)=85+45−8520−0(Quantity)=85−2(Quantity)

The inverse demand functions of price=85−2(Quantity) .

The inverse supply curve can be calculated as follows:

Price=PriceAt point 'c'+Equilibrium price−PriceAt point 'c'Q1−QuantityAt point 'c'(Quantity)=5+45−520−0(Quantity)=5+2(Quantity)

The inverse supply functions of price=5+2(Quantity) .

The inverse demand function and supply functions reveal that the producer willing price is $5 and the consumer willing price is $85. The equilibrium price is $45. The total surplus can be calculated as follows:

Total surplus=12(Consumer willing price−Producer willing price)×Equilibrium quantity=12(85−5)×20=(80)×10=800

The total surplus is $800.

The consumer surplus can be calculated as follows:

Consumer surplus=12(Consumer willing price−Equilibrium price)×Equilibrium quantity=12(85−45)×20=(40)×10=400

The consumer surplus is $400.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart (b):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (b):

Expert Solution

Explanation of Solution

The consumer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output to the inverse demand function.

Price=85−2(15)=85−30=55

The consumer new willing price is $55.

The producer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output into the inverse supply function.

Price=5+2(15)=5+30=35

The producer’s new willing price is $35.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(55−35)×(20−15)=12(20)×(5)=50

The deadweight loss is $50.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−50=750

The total surplus is $750.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart c):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart c):

Expert Solution

Explanation of Solution

The consumer willing price at Q3 level of output (27 units) can be calculated by substituting the Q3 level of output to the inverse demand function.

Price=85−2(27)=85−54=31

The consumer new willing price is $31.

The producer willing price at Q3 level of output (127 units) can be calculated by substituting the Q3 level of output to the inverse supply function.

Price=5+2(27)=5+54=59

The producer new willing price is $59.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(31−59)×(20−27)=12(−28)×(−7)=98

The deadweight loss is $98.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−98=702

The total surplus is $702.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 4, Problem 4P

Subpart (a):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (a):

Expert Solution

Explanation of Solution

Figure -1 illustrates the market equilibrium that is arrived at equilibrium between the demand and supply curve.

Macroeconomics, Chapter 4, Problem 4P

In figure -1 panel (a) and (b), the horizontal axis measures the quantity of bags and the vertical axis measures the price per bag. The curve ‘S’ represents the supply and the curve ‘D’ represents the demand.

The inverse demand function can be derived as follows:

Price=PriceAt point 'a'+Equilibrium price−PriceAt point 'a'Q1−QuantityAt point 'a'(Quantity)=85+45−8520−0(Quantity)=85−2(Quantity)

The inverse demand functions of price=85−2(Quantity) .

The inverse supply curve can be calculated as follows:

Price=PriceAt point 'c'+Equilibrium price−PriceAt point 'c'Q1−QuantityAt point 'c'(Quantity)=5+45−520−0(Quantity)=5+2(Quantity)

The inverse supply functions of price=5+2(Quantity) .

The inverse demand function and supply functions reveal that the producer willing price is $5 and the consumer willing price is $85. The equilibrium price is $45. The total surplus can be calculated as follows:

Total surplus=12(Consumer willing price−Producer willing price)×Equilibrium quantity=12(85−5)×20=(80)×10=800

The total surplus is $800.

The consumer surplus can be calculated as follows:

Consumer surplus=12(Consumer willing price−Equilibrium price)×Equilibrium quantity=12(85−45)×20=(40)×10=400

The consumer surplus is $400.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart (b):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (b):

Expert Solution

Explanation of Solution

The consumer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output to the inverse demand function.

Price=85−2(15)=85−30=55

The consumer new willing price is $55.

The producer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output into the inverse supply function.

Price=5+2(15)=5+30=35

The producer’s new willing price is $35.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(55−35)×(20−15)=12(20)×(5)=50

The deadweight loss is $50.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−50=750

The total surplus is $750.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart c):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart c):

Expert Solution

Explanation of Solution

The consumer willing price at Q3 level of output (27 units) can be calculated by substituting the Q3 level of output to the inverse demand function.

Price=85−2(27)=85−54=31

The consumer new willing price is $31.

The producer willing price at Q3 level of output (127 units) can be calculated by substituting the Q3 level of output to the inverse supply function.

Price=5+2(27)=5+54=59

The producer new willing price is $59.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(31−59)×(20−27)=12(−28)×(−7)=98

The deadweight loss is $98.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−98=702

The total surplus is $702.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 4, Problem 4P

Subpart (a):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (a):

Expert Solution

Explanation of Solution

Figure -1 illustrates the market equilibrium that is arrived at equilibrium between the demand and supply curve.

Macroeconomics, Chapter 4, Problem 4P

In figure -1 panel (a) and (b), the horizontal axis measures the quantity of bags and the vertical axis measures the price per bag. The curve ‘S’ represents the supply and the curve ‘D’ represents the demand.

The inverse demand function can be derived as follows:

Price=PriceAt point 'a'+Equilibrium price−PriceAt point 'a'Q1−QuantityAt point 'a'(Quantity)=85+45−8520−0(Quantity)=85−2(Quantity)

The inverse demand functions of price=85−2(Quantity) .

The inverse supply curve can be calculated as follows:

Price=PriceAt point 'c'+Equilibrium price−PriceAt point 'c'Q1−QuantityAt point 'c'(Quantity)=5+45−520−0(Quantity)=5+2(Quantity)

The inverse supply functions of price=5+2(Quantity) .

The inverse demand function and supply functions reveal that the producer willing price is $5 and the consumer willing price is $85. The equilibrium price is $45. The total surplus can be calculated as follows:

Total surplus=12(Consumer willing price−Producer willing price)×Equilibrium quantity=12(85−5)×20=(80)×10=800

The total surplus is $800.

The consumer surplus can be calculated as follows:

Consumer surplus=12(Consumer willing price−Equilibrium price)×Equilibrium quantity=12(85−45)×20=(40)×10=400

The consumer surplus is $400.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart (b):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (b):

Expert Solution

Explanation of Solution

The consumer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output to the inverse demand function.

Price=85−2(15)=85−30=55

The consumer new willing price is $55.

The producer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output into the inverse supply function.

Price=5+2(15)=5+30=35

The producer’s new willing price is $35.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(55−35)×(20−15)=12(20)×(5)=50

The deadweight loss is $50.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−50=750

The total surplus is $750.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Subpart c):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart c):

Expert Solution

Explanation of Solution

The consumer willing price at Q3 level of output (27 units) can be calculated by substituting the Q3 level of output to the inverse demand function.

Price=85−2(27)=85−54=31

The consumer new willing price is $31.

The producer willing price at Q3 level of output (127 units) can be calculated by substituting the Q3 level of output to the inverse supply function.

Price=5+2(27)=5+54=59

The producer new willing price is $59.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(31−59)×(20−27)=12(−28)×(−7)=98

The deadweight loss is $98.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−98=702

The total surplus is $702.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Answer 6

Chapter 4, Problem 4P

Subpart (a):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (a):

Expert Solution

Explanation of Solution

Figure -1 illustrates the market equilibrium that is arrived at equilibrium between the demand and supply curve.

Macroeconomics, Chapter 4, Problem 4P

In figure -1 panel (a) and (b), the horizontal axis measures the quantity of bags and the vertical axis measures the price per bag. The curve ‘S’ represents the supply and the curve ‘D’ represents the demand.

The inverse demand function can be derived as follows:

Price=PriceAt point 'a'+Equilibrium price−PriceAt point 'a'Q1−QuantityAt point 'a'(Quantity)=85+45−8520−0(Quantity)=85−2(Quantity)

The inverse demand functions of price=85−2(Quantity) .

The inverse supply curve can be calculated as follows:

Price=PriceAt point 'c'+Equilibrium price−PriceAt point 'c'Q1−QuantityAt point 'c'(Quantity)=5+45−520−0(Quantity)=5+2(Quantity)

The inverse supply functions of price=5+2(Quantity) .

The inverse demand function and supply functions reveal that the producer willing price is $5 and the consumer willing price is $85. The equilibrium price is $45. The total surplus can be calculated as follows:

Total surplus=12(Consumer willing price−Producer willing price)×Equilibrium quantity=12(85−5)×20=(80)×10=800

The total surplus is $800.

The consumer surplus can be calculated as follows:

Consumer surplus=12(Consumer willing price−Equilibrium price)×Equilibrium quantity=12(85−45)×20=(40)×10=400

The consumer surplus is $400.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Answer 7

Chapter 4, Problem 4P

Subpart (a):

To determine

The consumer surplus, total surplus and deadweight loss.

Answer 8

Subpart (a):

Expert Solution

Explanation of Solution

Figure -1 illustrates the market equilibrium that is arrived at equilibrium between the demand and supply curve.

Macroeconomics, Chapter 4, Problem 4P

In figure -1 panel (a) and (b), the horizontal axis measures the quantity of bags and the vertical axis measures the price per bag. The curve ‘S’ represents the supply and the curve ‘D’ represents the demand.

The inverse demand function can be derived as follows:

Price=PriceAt point 'a'+Equilibrium price−PriceAt point 'a'Q1−QuantityAt point 'a'(Quantity)=85+45−8520−0(Quantity)=85−2(Quantity)

The inverse demand functions of price=85−2(Quantity) .

The inverse supply curve can be calculated as follows:

Price=PriceAt point 'c'+Equilibrium price−PriceAt point 'c'Q1−QuantityAt point 'c'(Quantity)=5+45−520−0(Quantity)=5+2(Quantity)

The inverse supply functions of price=5+2(Quantity) .

The inverse demand function and supply functions reveal that the producer willing price is $5 and the consumer willing price is $85. The equilibrium price is $45. The total surplus can be calculated as follows:

Total surplus=12(Consumer willing price−Producer willing price)×Equilibrium quantity=12(85−5)×20=(80)×10=800

The total surplus is $800.

The consumer surplus can be calculated as follows:

Consumer surplus=12(Consumer willing price−Equilibrium price)×Equilibrium quantity=12(85−45)×20=(40)×10=400

The consumer surplus is $400.

Answer 9

Subpart (a):

Expert Solution

Answer 10

Subpart (a):

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Answer 13

Subpart (b):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart (b):

Expert Solution

Explanation of Solution

The consumer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output to the inverse demand function.

Price=85−2(15)=85−30=55

The consumer new willing price is $55.

The producer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output into the inverse supply function.

Price=5+2(15)=5+30=35

The producer’s new willing price is $35.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(55−35)×(20−15)=12(20)×(5)=50

The deadweight loss is $50.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−50=750

The total surplus is $750.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Answer 14

Subpart (b):

To determine

The consumer surplus, total surplus and deadweight loss.

Answer 15

Subpart (b):

Expert Solution

Explanation of Solution

The consumer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output to the inverse demand function.

Price=85−2(15)=85−30=55

The consumer new willing price is $55.

The producer willing price at Q2 level of output (15 units) can be calculated by substituting the Q2 level of output into the inverse supply function.

Price=5+2(15)=5+30=35

The producer’s new willing price is $35.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(55−35)×(20−15)=12(20)×(5)=50

The deadweight loss is $50.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−50=750

The total surplus is $750.

Answer 16

Subpart (b):

Expert Solution

Answer 17

Subpart (b):

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Answer 20

Subpart c):

To determine

The consumer surplus, total surplus and deadweight loss.

Subpart c):

Expert Solution

Explanation of Solution

The consumer willing price at Q3 level of output (27 units) can be calculated by substituting the Q3 level of output to the inverse demand function.

Price=85−2(27)=85−54=31

The consumer new willing price is $31.

The producer willing price at Q3 level of output (127 units) can be calculated by substituting the Q3 level of output to the inverse supply function.

Price=5+2(27)=5+54=59

The producer new willing price is $59.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(31−59)×(20−27)=12(−28)×(−7)=98

The deadweight loss is $98.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−98=702

The total surplus is $702.

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.

Answer 21

Subpart c):

To determine

The consumer surplus, total surplus and deadweight loss.

Answer 22

Subpart c):

Expert Solution

Explanation of Solution

The consumer willing price at Q3 level of output (27 units) can be calculated by substituting the Q3 level of output to the inverse demand function.

Price=85−2(27)=85−54=31

The consumer new willing price is $31.

The producer willing price at Q3 level of output (127 units) can be calculated by substituting the Q3 level of output to the inverse supply function.

Price=5+2(27)=5+54=59

The producer new willing price is $59.

The deadweight loss can be calculated as follows:

Deadweight loss=12(Consumer new willing price−Producer new wlling price)×(Equilibrium quantity−New quantity)=12(31−59)×(20−27)=12(−28)×(−7)=98

The deadweight loss is $98.

The total surplus can be calculated as follows:

Total surplus=Initial total surplus−Deadweight loss=800−98=702

The total surplus is $702.

Answer 23

Subpart c):

Expert Solution

Answer 24

Subpart c):

Expert Solution

Answer 25

Expert Solution

Answer 26

Economics Concept Introduction

Concept Introduction:

Consumer surplus: It refers to the variation in the probable charge of a product that the consumer intends to pay and the actual price that he has already paid.

Producer surplus: It refers to the variation in the probable price that the producer intends to sell and the actual price that he has already sold.