Question

Suppose the demand and supply curves for good X are both linear. And, the demand price for the first unit of X is $14, and the supply price for the first unit of X is $3. If the equilibrium price for good X is $8 and the equilibrium quantity of X is 12,000 units, then total consumer surplus is $________, total producer surplus is $________, and total social surplus is $__________ a. $36,000; $30,000; $66,000b. $30,000; $36,000; $66,000c. $6; $5; $11d. $6,000; $5,000; $11,000

Answer 1

a. $36,000; $30,000

Step-by-step explanation:

Consumer Surplus is the difference between price paid by the consumer & maximum price he is willing to pay. Graphically it is the triangular area above the equilibrium price, below the demand curve.

Producer Surplus is the difference between price received by the seller & his minimum selling price. Graphically it is the triangular area below the equilibrium price, above the supply curve.

So : The formula = 1/2 (price differential) (quantity)

Consumer Surplus = 1/2 (14-8)(12000) = 1/2 (6) (12000) = 1/2 (72000)

= 36000

Producer Surplus = 1/2 (8-3)(12000) = 1/2 (5) (12000) = 1/2 (60000)

= 30000