Question

In: Economics

D(x) is the price, in dollars per unit, that consumers are willing to pay for x...

D(x) is the price, in dollars per unit, that consumers are willing to pay for x units of an item, and S(x) is the price, in dollars per unit, that producers are willing to accept for x units. Find (a) the equilibrium point (b) the consumer surplus at the equilibrium point, and (c) the producer surplus at the equilibrium point.

D(x)=-5/6x+11,S(x)=1/3x+4

Solutions

Expert Solution

(a).

(b) and (c). There is no consumer surplus and no producer surplus at the equilibrium point because Consumer Surplus is the difference between the price that consumers pay and the price that they are willing to pay. On a supply and demand curve, it is the area between the equilibrium price and the demand curve. But here what the consumer wants to pay is equal to the price that avails in the market i.e.(equilibrium point). Same case with the producer, the producer accept for the unit is equal to the price that avails in the market i.e.(equilibrium point).

If price is higher than the equilibrium price then there exists a producer surplus and If price is lower than the equilibrium price then there exists a consumer surplus.

Rahul Sunny answered 2 years ago
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