Question

Angie has 12 cookies, and a marginal value curve described by P = 45 - 3Qa, while Benny has zero cookies, and a marginal value curve described by P = 44 - 2Qb.

2. Refer to the equations of Question 1. Assume Angie and Benny are the only two people in the cookie market. a) Write down the market demand function(s) and market supply function, and draw the market demand and supply curves in one graph. b) Solve for the market equilibrium price and quantity. c) How many cookies does each of them consume? d) How many cookies are traded? e) Solve for the consumer surplus and seller surplus.

Important!!)) I don't know how to get consumer surplus and seller surplus when kink exists.

e.g)

Answer 1

solution: 1(3) Given p=45-3Q p=u4-20b (Angie has 12 Cookies) (Benny has zero cookies) demand function (s) and market supply function (a) and The market graph is: Graphi I jas ist ps 1 10 20 30 40 Quantity The market demand function is: a = QAT QB = (15-8/3 ) + (22-112P). L ta'Qd = 37- SP

total market supply : Q = Q R + Qge -12 to = 12 • Qs =12] w market equilibrim price and wantity: » At equilibrium Qd = as 37-5160 =12 con sp = 25 :-(P= 30); Q=12] (C) Cookies they consume: & QA = 15-8/3 = !: Q8= 22 -p12 -27 (d) No of cookies traded: As "Á has all cookies and after trade B buys 7 cookies, then of cookees are traded. (e) consumer Surplus and seller Surplus: > market demand = Qd = 34- 576p -> Qd = 37C6)-P :: p=44:4-655Qd

3 Then then consumer surplus : cs = { 044-4-36) (12) =(869) Ps = 30 (12) = (360 - o-