Wheat Market Consumer Surplus Calculation

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  In such a case producer surplus falls to zero, consumer surplus rises, and 700 people come to see the shows. The new consumer surplus will become Consumer Surplus = 0.5 * 14 * 700 = 4900.

• Microeconomics: Factors of Production, Land and Labour

  Similarly the labor market, capital market and the wine industry would be benefited in Abroad by exporting surplus labor and wine to Home and the consumers of wheat in Abroad would be benefited from import of wheat from Home at a cheaper cost.

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  How large is the dollar value of the consumer surplus at the output level? At allocative efficiency (market price) the total area of the triangle ABC is the total surplus.

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  So consumer surplus = 1/2*(14-7)*210 = 735 thousand$ The total benefit = consumer surplus + spending = 735+ 1470 = 2205 thousand$ c) However, the producer surplus is the area above supply curve (SS) AND below price level = the area (2) = 1/2*7*210 =

• Market equilibrium price and output combination

  Market equilibrium is the point where there is no shortage or surplus. From (b) above we see that equilibrium price is $2 and the quantity is 50. Calculate the market equilibrium price/output combination.

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  For example, if there is overproduction of wheat in an exceptionally good year, the prices might fall too low if a competitive market is allowed.

• Question

  20705 Question How does a surplus or a shortage affect the market price? A surplus is caused in the market when there is excessive supply and low demand. Sellers are therefore unable to sell their excessive amounts of products.