Question

Draw the consumer surplus and producer surplus if the price is $30.

Answer 1

Consumer surplus and producer surplus can be visually represented on a supply and demand graph with a price of $30. Consumer surplus is the area between the demand curve and the price line up to the quantity demanded, while producer surplus is the area between the supply curve and the price line up to the quantity supplied.

Step-by-step explanation:

Consumer surplus is the economic benefit that consumers receive when they purchase a good or service at a price lower than the maximum price they are willing to pay. On a supply and demand graph, consumer surplus is represented by the area between the demand curve and the price line up to the quantity demanded at the given price. The calculation for consumer surplus
`(\(CS\))` is given by the formula:

`\[ CS = (1)/(2) * (Q_{\text{max}} - Q_{\text{actual}}) * (P_{\text{max}} - P_{\text{actual}}) \]`

where Q represents quantity and P represents price. In this case, with a price of $30, one can calculate the consumer surplus by determining the quantity demanded at that price and applying the formula.

Similarly, producer surplus represents the economic benefit that producers receive when they sell a good or service at a price higher than the minimum price they are willing to accept.

On a supply and demand graph, producer surplus is represented by the area between the supply curve and the price line up to the quantity supplied at the given price. The calculation for producer surplus PS is similar to the consumer surplus formula, considering the difference between the maximum and actual prices and quantities. Understanding these concepts and their graphical representations is fundamental in analyzing market efficiency and welfare economics.