Question

Pre the deplin how you het 1. Al the pursum price calculate consumer surplus 1 point CS 2. If the government impreses a price of 5100 in this market, then by how much r e sula will decrease point 3. If the government imposes a price ceiling of 580 in this market, ther, assuming those with the highest willingness to pay purchase the good calculate consumer surplus point

Answer 1

The quantity demanded is equal to quantity supplied at a price of $ 110 and at a quantity of 35 units. (image is blur so, change it as per the graph, if required)

Consumer surplus = (1/2)×(160 - 90) × 35 = $ 1,225

2. At a price floor of $ 100 the quantity supplied will decrease and quantity demanded will increase. But this price floor is non-binding as the price floor is less than the equilibrium price. Hence, it will have no impact on the market.

Change in consumer surplus = $ 0

3. When the government imposes a price ceiling at a price of $ 80 this is a binding price. Thus, the quantity demanded will be greater than the quantity supplied. Hence, there will be shortage in the market.

Consumer surplus = (1/2)×(160-100)×30 + (100-80)×30

= 900 + 600

= $ 1,500

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