Answer:
Consumers surplus = $4
Producers surplus = $4
Explanation:
Quantity demanded = Quantity supplied (when there is equilibrium).
Given:
Demand function: PX = 10 -2Q
Supply function: PX = 2 + 2Q
We first solve the equation:
10 - 2Q = 2 + 2Q
Bringing like terms, we have:
2Q + 2Q = 10 -2
4Q = 8
Q = 2
Substituting 2 for Q in the demand function, we have:
P = 10 - (2 x 2) =
= 10 - 4 = 6
(When Q=2, P will be 6)
Therefore, from the demand function, when Q = 0, P = 10
Therefore, consumer's surplus will be:
CS = (1/2) x ($10 - $6) x 2 =
=(1/2) x 4 x 2 = $4
From supply function, When Q = 0, P = 2 (Minimum acceptable price)
Therefore, producer's surplus will be:
PS = (1/2) x ($6 - $2) x 2
= (1/2) x 4 x 2 = $4
