Question

A market has a demand curve given by P = 800 – 10Q where P = the price per unit and Q = the number of units. The supply curve is given by P =100 + 10Q.

(10 points) Graph the demand and supply curves and calculate the equilibrium price and quantity in this market.

(5 points) Calculate the consumer surplus at equilibrium.

(5 points) Calculate the producer surplus at equilibrium.(5 points)

(5 points) Calculate the total surplus at equilibrium

Answer #1

**Demamd equation; P = 800 – 10Q**

**supply equation P =100 + 10Q**.

Equilibrium achived where Demand = Supply

800-10Q = 100+10Q

20Q = 700

Q =700/20

Q = 35

Put Q = 35 in demand equation to calculate equilibrium price

P = 800 -10Q

P = 800 - 10*(35)

P = 800 - 350

P = 450

**Consumer Surplus = 1/2*change in price
*quantity**

= 1/2*(800-450)*35

= 6,125

**Producer Surplus = 1/2*change in price
*quantity**

= 1/2*(450-100)*35

= 6,125

**Total Surplus = Consumer surplus + Producer
surplus**

= 6,125+6,125

= 12,250

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