Chapter 49, Problem 1FRQ

a)

To determine

Consumer surplus

Explanation of Solution

  $\begin{array}{l}\text{Consumer surplus }=\mathrm{½}\times \left(Q\right)\times \left(\text{Change in price}\right)\hfill \\ =\mathrm{½}\times \left(200\right)\times \left(80-40\right)\hfill \\ =400\hfill \end{array}$

Consumer surplus would be 400.

Economics Concept Introduction

Introduction: Consumer benefit that is incurred from market competition or buying goods at a certain price is called consumer surplus.

b)

To determine

Producer surplus

Explanation of Solution

  $\begin{array}{l}\text{Producer surplus }=\mathrm{½}\times \left(200\right)\times \left(40-10\right)\hfill \\ =\mathrm{½}\times 6000\hfill \\ =3000\hfill \end{array}$

Producer surplus would be 3000.

Economics Concept Introduction

Introduction: A benefit that a producer enjoys while selling goods in the market or amount that a producer receives from trade is called producer surplus.

c)

To determine

Consumer surplus when supply increases.

Explanation of Solution

With the increase in supply, the consumer surplus will also increase because with the increase in supply, the price of goods can go down which will increase the consumer surplus.

Economics Concept Introduction

Introduction: Consumer benefit that is incurred from market competition or buying goods at a certain price is called consumer surplus.

d)

To determine

Producer surplus when demand decreases.

Explanation of Solution

If demand decreases then producer surplus will also decrease because shift in demand cause producer’s surplus. If demand decreases then producer will experience low price and low surplus.

Economics Concept Introduction

Introduction: A benefit that a producer enjoys while selling goods in the market or amount that a producer receives from trade is called producer surplus.