Question

Given the demand function PD =27-Q2 and supply function PS =2Q+3 Assuming perfect competition find
1. The comsumers surplus
2. The producer's surplus

Answer 1

In equilibrium Qd = Qs, so:

27 - 2Q = 2Q + 3,

4Q = 24,

Q = 6 units,

P = 2×6 + 3 = 15.

1. The comsumers surplus is:

$CS = 0.5×(27 - 15)×6 = 36.$

2. The producer's surplus is:

$PS = 0.5×(15 - 3)×6 = 36.$