Question

1. Consider the supply and demand for broadband Internet service, given as follows: Q _D = 224 – 4P, and Q_S= 12.5P – 150 where Q is the number of subscribers in a given area (in hundreds) and P is the price in dollars per month.

a. The equilibrium price of broadband Internet service

b. The equilibrium quantity of broadband Internet service

c. Consumer surplus

d. Producer surplus

e. The total surplus received by producers and consumers together

Answer 1

@d=2au- up Qs = 12.5p - 150 In Equilibrium 2an-up =12.5p-iso aantiso =l2-sp tup 374 = 16.5P P = 374 16.5 p = 22.66 substituting p into ad Qd = 224-4 (22.66) = 2a4.-90.66 Q = 133. 33 units. (9) Equilibrium price = 22.66 (6) Equilibrium quantity = 133.33 units. (6) when a=0 0 =224 -up P =224
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P-S6 Consumer Surplus = Aren of A (below demand curve and above price) 딜XBH =0.5X133.33 x (S6-22166) cos X 133.33* 33.24 = $ 2,227.61 when Qs=0 0 = 12.5 p-150 12.SP = iso P = iso 12 .5 p= 12 P.S = Area of A below price and above supply curve - IX BXH SOS X 133:33 * (22.66.–12) =0.5 x 133.33 X 10.66 = 76.64 (8) Total surplus acist P.S. = 2222,61 +710.64 = 2933.25