Question

den P= -2at1(o r 20+20 Figure 2 TPrice 300 S 4a-140 215 250+ 10x35 225 200 175 CS- WIPzP 150 125 100 75 50 25 + D' Deaxtity 25 50 75 100 125 150 175 200 4. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? 15 point] 5. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus? 15 point] 6. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus? 15 point

Answer 1

Answer : 4) When the equilibrium price is $100 then quantity is 50.

So,

Producer surplus (P.S.) = 0.5 * Height * Base

P.S. = 0.5 * (100 - 0) * 50

=> P.S. = $2,500

Therefore, here the producer surplus is $2,500.

5) When equilibrium price is $150 then the quantity is 25.

So,

Producer surplus (P.S.) = 0.5 * Height * Base

P.S. = 0.5 * (150 - 100) * 25

=> P.S. = $625

Therefore, here the producer surplus is $625.

6) When demand is D and supply curve shifts from S' to S then the changes in producer surplus = 2,500 - 625 = $1,875. Therefore, here the producer surplus increases by $1,875.