Question

The market for farm goods in the (current) European Union has supply and demand curves 1,000,102 - 513P -4,665 + 305P where Q refers to tons of farm goods, and P the price of 1 ton of farm goods (in dollars). Farmers are the producers in this market. Currently (in autarchy) how much surplus do the farmers earn?

Answer 1

To find the surplus earned by the farmers in the current European Union, we need to determine the equilibrium price and quantity where the supply curve intersects the demand curve. By setting the two equations equal to each other and solving for P, we can find the equilibrium price. Once we have the equilibrium price, we can calculate the surplus earned by the farmers.

Step-by-step explanation:

In the given question, the market for farm goods in the current European Union is represented by the supply and demand curves.

Supply curve: 1,000,102 - 513P

Demand curve: -4,665 + 305P

To find the surplus earned by the farmers, we need to determine the equilibrium price where the quantity supplied equals the quantity demanded. This equilibrium is reached when the supply curve intersects the demand curve. By setting the two equations equal to each other and solving for P, we can find the equilibrium price.

Once we have the equilibrium price, we can calculate the surplus earned by the farmers by subtracting the equilibrium quantity demanded from the equilibrium quantity supplied, and multiplying it by the price.