Answered: 1. Market supply is described by Q =…

1. Market supply is described by Q = 2.6P, where Q is the quantity demanded and P is the price in dollars. Let the market equilibrium price be $3.2. What is the producer surplus?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

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.

Question

1. Market supply is described by Q = 2.6P,
where Q is the quantity demanded and P is
the price in dollars. Let the market equilibrium
price be $3.2. What is the producer surplus?

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