Homework Answers
Equilibrium price, P = $18
Equilibrium quantity, Q = 60
Price consumers are willing to pay for a quantity of zero, Pb =
$40
Price producers are willing to accept for a quantity of zero, Ps =
$8
Consumer surplus = area below downward sloping curve and above P
= area of triangle = (1/2)*base*height
So, Consumer surplus = (1/2)*(Q)*(Pb - P) =
(1/2)*(60)*(40 - 18) = 30*(22) = $660
Producer surplus = area above positively sloping curve and below
P = area of triangle = (1/2)*base*height
So, Producer surplus = (1/2)*(Q)*(P - Ps) =
(1/2)*(60)*(18 - 8) = 30*(10) = $300
Total welfare = Consumer surplus + Producer surplus = 660 + 300 = $960
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