Given the following equations: P = 450 - 50Qd Inverse Demand Qd = 9 - .02P Regular Demand P=50+50Qs Inverse Supply Qs=-1+0.02P Regular Supply a. What is the equilibrium in this market? b. Find the consumer surplus at equilibrium c. Find the producer surplus d. Find the social surplus

Given the following equations: P = 450 - 50Qd Inverse Demand Qd = 9 - .02P Regular Demand P=50+50Qs Inverse Supply Qs=-1+0.02P Regular Supply a. What is the equilibrium in this market? b. Find the consumer surplus at equilibrium c. Find the producer surplus d. Find the social surplus

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter7: Market Efficiency And Welfare

Section: Chapter Questions

Problem 1P

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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

Consumer’s gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price and up to the equilibrium quantity. Consumer surplus is represented by area A.

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