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    Equilibrium price & quantity and total consumer surplus

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    Consider three supply & demand scenarios in this question. In each case, we have a perfectly competitive market and the market demand curve is given by P = $100 - Q where P is the market price and Q is the market quantity. In the first scenario, the market supply curve is given by P = $50. In the second, the market supply is given by P = Q and in the third, the market supply is given by Q = 50

    For each scenario, calculate the equilibrium price and quantity, the total consumer surplus, and the total producer surplus.

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    https://brainmass.com/economics/demand-supply/equilibrium-price-quantity-total-consumer-surplus-293295

    Solution Preview

    First Case:
    Demand P=100-Q
    Supply P=50
    Equating demand and supply to get the equilibrium price and quantity, we get
    100-Q=50
    Q=50

    The consumer surplus is the area between the demand curve and price line. The triangle formed by the following three points
    1. Where demand curve intersects the Y axis. In this case, this point is P=100, Q=0
    2. Where price line intersects the Y axis. In this case, this point is P=50, Q=0
    3. Equilibrium point. P=50, Q=50
    Consumer surplus = 0.5*(100-50)*50=1250

    The producer surplus is the area between the supply curve and price line. The area formed by the following three points
    1. Where supply curve intersects the Y ...

    Solution Summary

    This solution emphasizes equilibrium price and quantity, the total consumer surplus, and the total producer surplus.

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