Question

Question 3 14 pts The supply and demand for electric scooters are given by: Supply: P = 5 + 4 Qs Demand: P = 100 - QD A. (4 points) What is the equilibrium quantity of scooters in Tempe? B. (4 points) What is the equilibrium price of scooters in Tempe? Refer to the graph below for questions C and D: Supply A Demand Qм C. What area on the graph corresponds to consumer surplus? D. What are on the graph corresponds to producer surplus?

Answer 1

Answer 3

(A)

Here Supply is given by :P = 5 + 4Q_S => Q_S = (1/4)(P - 5)

Demand is given by :P = 100 - Q_D => Q_S = 100 - P

Equilibrium occurs when Q_S = Q_D => (1/4)(P - 5) = 100 - P

=> P - 5 = 400 - 4P

=> 5P = 405

=> P = 81 -----------------------------Equilibrium price.

Thus Q_S = Q_D = 100 - 81 = 19

Hence Equilibrium Quantity = 19.

(B)

Here Supply is given by :P = 5 + 4Q_S => Q_S = (1/4)(P - 5)

Demand is given by :P = 100 - Q_D => Q_S = 100 - P

Equilibrium occurs when Q_S = Q_D => (1/4)(P - 5) = 100 - P

=> P - 5 = 400 - 4P

=> 5P = 405

=> P = 81

Hence, Equilibrium price = 81

(C)

Consumer surplus is the benefit consumer receives by paying a price less than what they are willing to pay.

Mathematically Consumer surplus is the area above Price line and Below demand curve.

We cans see from above graph that demand and supply curve intersect at Price = P_M and thus Market price = P_M

Thus Consumer surplus is the area above Price line(P_M) and below demand curve and here that Area is A.

Hence Consumer Surplus = A.

(D)

Producer surplus is the benefit Producer receives by selling at a price more than what they are willing to sell.

Mathematically Producer surplus is the area below Price line and above supply curve.

We cans see from above graph that demand and supply curve intersect at Price = P_M and thus Market price = P_M

Thus Producer surplus is the area below Price line(P_M) and above supply curve and here that Area is B.

Hence Producer Surplus = B.