ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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![### The Market for Good X
The market for Good X is depicted below:
![Market for Good X Diagram]
The diagram shows the supply (S) and demand (D) curves for Good X. The price (P) is on the vertical axis and the quantity (Q) is on the horizontal axis. Various price and quantity points are marked on the graph to illustrate changes in the market.
**Prices:**
- \(P_0 = \$5\)
- \(P_{S,0} = \$8\)
- \(P_{S,1} = \$11\)
- \(P^* = \$14\)
- \(P_{B,1} = \$16\)
- \(P_{B,0} = \$18\)
- \(P = \$20\)
**Quantities:**
- \(Q_0 = 40\)
- \(Q_1 = 80\)
- \(Q^* = 120\)
#### Graph Description:
1. **Supply Curve (S):** This curve slopes upward from left to right, indicating that as the price increases, the quantity supplied also increases.
2. **Demand Curve (D):** This curve slopes downward from left to right, indicating that as the price increases, the quantity demanded decreases.
3. **Intersection:** The point where the supply and demand curves intersect is the equilibrium point, which determines the equilibrium price and quantity.
4. **Price Points:**
- \(P_0\) and \(P_{B,0}\) represent the lowest and highest benchmark prices.
- \(P_{S,0}\), \(P_{S,1}\), \(P_{B,1}\), and \(P = \$20\) represent other price levels.
- \(P^*\) represents the equilibrium price.
5. **Quantity Points:**
- \(Q_0\), \(Q_1\), and \(Q^*\) represent respective quantities at lower, higher, and equilibrium points.
#### Consumer Surplus Calculation:
**Question:** What is the consumer surplus if there is a $5 per unit transaction cost?
The consumer surplus is the difference between what consumers are willing to pay and what they actually pay. This is typically illustrated as the area under the demand curve but above the market price, up to the quantity purchased.
(Note: Do not include the dollar sign ($) in your answer.)
Transcribed Image Text:### The Market for Good X
The market for Good X is depicted below:
![Market for Good X Diagram]
The diagram shows the supply (S) and demand (D) curves for Good X. The price (P) is on the vertical axis and the quantity (Q) is on the horizontal axis. Various price and quantity points are marked on the graph to illustrate changes in the market.
**Prices:**
- \(P_0 = \$5\)
- \(P_{S,0} = \$8\)
- \(P_{S,1} = \$11\)
- \(P^* = \$14\)
- \(P_{B,1} = \$16\)
- \(P_{B,0} = \$18\)
- \(P = \$20\)
**Quantities:**
- \(Q_0 = 40\)
- \(Q_1 = 80\)
- \(Q^* = 120\)
#### Graph Description:
1. **Supply Curve (S):** This curve slopes upward from left to right, indicating that as the price increases, the quantity supplied also increases.
2. **Demand Curve (D):** This curve slopes downward from left to right, indicating that as the price increases, the quantity demanded decreases.
3. **Intersection:** The point where the supply and demand curves intersect is the equilibrium point, which determines the equilibrium price and quantity.
4. **Price Points:**
- \(P_0\) and \(P_{B,0}\) represent the lowest and highest benchmark prices.
- \(P_{S,0}\), \(P_{S,1}\), \(P_{B,1}\), and \(P = \$20\) represent other price levels.
- \(P^*\) represents the equilibrium price.
5. **Quantity Points:**
- \(Q_0\), \(Q_1\), and \(Q^*\) represent respective quantities at lower, higher, and equilibrium points.
#### Consumer Surplus Calculation:
**Question:** What is the consumer surplus if there is a $5 per unit transaction cost?
The consumer surplus is the difference between what consumers are willing to pay and what they actually pay. This is typically illustrated as the area under the demand curve but above the market price, up to the quantity purchased.
(Note: Do not include the dollar sign ($) in your answer.)
![Image of Input Box
![**The Market for Good X**
The chart below illustrates the market for Good X:
![Market for Good X Diagram]
- **P**: Price
- **Q**: Quantity
- **S**: Supply Curve
- **D**: Demand Curve
Key Points on the Graph:
- **P0**: $5
- **PS,0**: $8
- **PS,1**: $11
- **P***: $14
- **PB,1**: $16
- **PB,0**: $18
- **Q0**: 40 units
- **Q1**: 80 units
- **Q***: 120 units
**Explanation:**
The supply curve (S) slopes upward, demonstrating that as price increases, the quantity supplied also increases. The demand curve (D) slopes downward, indicating that as price increases, the quantity demanded decreases. The intersecting point of the supply and demand curves indicates the market equilibrium, where the quantity supplied equals the quantity demanded.
**Graphical Details:**
- **P0** to **P*** (prices) are aligned horizontally from the price axis (vertical axis-P).
- The corresponding quantities **Q0** to **Q*** are aligned vertically from the quantity axis (horizontal axis-Q).
- Prices **PS,0**, **PS,1**, **PB,1**, **PB,0** and their respective quantities align with segments showing different potential market scenarios or thresholds on the graph.
### Question:
- What is the quantity exchanged if there are no transaction costs?
Given the key values, in an ideal market without transaction costs, the quantity exchanged would be at the equilibrium point **Q*** which is 120 units, where both the supply and demand are balanced at the price **P*** of $14.](https://content.bartleby.com/qna-images/question/9cc137fb-a087-47c2-9513-92dd4832755c/0ce450c7-c36b-4791-b9c3-61373f318739/zjkrdeu_processed.jpeg)
Transcribed Image Text:**The Market for Good X**
The chart below illustrates the market for Good X:
![Market for Good X Diagram]
- **P**: Price
- **Q**: Quantity
- **S**: Supply Curve
- **D**: Demand Curve
Key Points on the Graph:
- **P0**: $5
- **PS,0**: $8
- **PS,1**: $11
- **P***: $14
- **PB,1**: $16
- **PB,0**: $18
- **Q0**: 40 units
- **Q1**: 80 units
- **Q***: 120 units
**Explanation:**
The supply curve (S) slopes upward, demonstrating that as price increases, the quantity supplied also increases. The demand curve (D) slopes downward, indicating that as price increases, the quantity demanded decreases. The intersecting point of the supply and demand curves indicates the market equilibrium, where the quantity supplied equals the quantity demanded.
**Graphical Details:**
- **P0** to **P*** (prices) are aligned horizontally from the price axis (vertical axis-P).
- The corresponding quantities **Q0** to **Q*** are aligned vertically from the quantity axis (horizontal axis-Q).
- Prices **PS,0**, **PS,1**, **PB,1**, **PB,0** and their respective quantities align with segments showing different potential market scenarios or thresholds on the graph.
### Question:
- What is the quantity exchanged if there are no transaction costs?
Given the key values, in an ideal market without transaction costs, the quantity exchanged would be at the equilibrium point **Q*** which is 120 units, where both the supply and demand are balanced at the price **P*** of $14.
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