Question

The Generator is a popular youth hostel in London located near Kings Cross. The hostel provides a bed, showers, and breakfast in their nightly fee. Suppose the quantity demanded is 0 when the price is S90 per night, and quantity demanded is 90 when the price is $10. Quantity supplied is 0 when the price is $10 and 100 when the price is $80. Adjust the graph accordingly.

Answer 1

Represent the graph showing the consumer surplus. producer surplus and total surplus as follows: 1000 95 (o, s90) 85 80 75 70 65Consumer Equilibrium point (100, S80) Surplus (CS Total Surplus (TS) Producer 35 30 Surplus 25 20 (90, S10) s (0, $10) 10 20 30 405060 70 80 90 100 beds Equilibrium is the point, where both demand and supply curve intersect each other Thus, in equilibrium, a total of 50 beds are rented

Calculate the total surplus as follows: Total surplus - Consumer surplus + Producer surplus [150-0)×(90-45)]+[!(50-0)×(45-10)] [1.50×45].[ 50 35] (0.5×2,250)-(0.5×1, 750) -1,125+875 = |$2,000 Thus, the total surplus is S2,000