Suppose Ernie is the only seller in the market for bottled water and Bert is the only buyer. The following lists show the value
Bert places on a bottle of water and the cost Ernie incurs to produce each bottle of water:
Bert's Value
Value of first bottle: $7
Value of second bottle: $5
Value of third bottle: $3
Value of fourth bottle: $1
Ernie's Costs
Cost of first bottle: $1
Cost of second bottle: $3
Cost of third bottle: $5
Cost of fourth bottle: $7
The following table shows their respective supply and demand schedules:
Price Quantity Supplied Quantity Demanded
More than $7 4 0
$5 to $7 3 1
$3 to $5 2 2
$1 to $3 1 3
$1 or less 0 4
Use Ernie's supply schedule and Bert's demand schedule to find the quantity supplied and quantity demanded at prices of $2, $4, and $6. Enter these values in the following table.
Price Quantity Supplied Quantity Demanded
2
4
6
A price of brings supply and demand into equilibrium.
At the equilibrium price, consumer surplus is, producer surplus is, and total surplus is.
If Ernie produced and Bert consumed one less bottle of water, total surplus would .
If instead, Ernie produced and Bert consumed one additional bottle of water, total surplus would .
Bert's Value
Value of first bottle: $7
Value of second bottle: $5
Value of third bottle: $3
Value of fourth bottle: $1
Ernie's Costs
Cost of first bottle: $1
Cost of second bottle: $3
Cost of third bottle: $5
Cost of fourth bottle: $7
The following table shows their respective supply and demand schedules:
Price Quantity Supplied Quantity Demanded
More than $7 4 0
$5 to $7 3 1
$3 to $5 2 2
$1 to $3 1 3
$1 or less 0 4
Use Ernie's supply schedule and Bert's demand schedule to find the quantity supplied and quantity demanded at prices of $2, $4, and $6. Enter these values in the following table.
Price Quantity Supplied Quantity Demanded
2
4
6
A price of brings supply and demand into equilibrium.
At the equilibrium price, consumer surplus is, producer surplus is, and total surplus is.
If Ernie produced and Bert consumed one less bottle of water, total surplus would .
If instead, Ernie produced and Bert consumed one additional bottle of water, total surplus would .
1 answer:
Your <em>question is not clear enough</em>. However it could be inferred you want details plotted out of the supply and demand schedule as outlined in attached image.
<u>Explanation:</u>
- From the information in the attached image only a price of $4 brings supply and demand into equilibrium, with an equilibrium quantity of 2.
- Also at a price of $4, consumer surplus is $4 and producer surplus is $4. Total surplus is $4+$4=$8.
- The law of diminishing returns applies here and so If Ernie produced one fewer bottle, his producer surplus would decline to $3. If Bert consumed one fewer bottle, his consumer surplus would decline to $3. So total surplus would decline to $3+$3=$6.
- Finally, when Ernie produced one additional bottle of water, his cost would be $5, From Ernie's supply schedule and Bert's demand schedule, the quantity demanded and supplied is only $4, so his producer surplus would decline by $1. If Bert consumed one additional bottle of water, his value would be $3, but the price is $4, so his consumer surplus would decline by $1. So total surplus declines by $1+$1 = $2.
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