Answer to Question #265898 in Microeconomics for Tem

Question

Demand for Kristal blanket is given by D_P = 42 − 2p , the supply function is

given by S_P = 5p;

What is the equilibrium price, output, consumer and producer surplus in the market for Kristal blankets?

Answer 1

Solution:

At equilibrium: Qd = Q$\times$

42 – 2p = 5p

42 = 5p + 2p

42 = 7p

P = 6

Equilibrium price = 6

Substitute in either the demand or supply function to determine equilibrium quantity:

Qd = 42 – 2p = 42 – 2(6) = 42 – 12 = 30

Qs = 5p = 5 $\times$ 6 = 30

Equilibrium quantity = 30

 

Consumer surplus = ½ $\times$ (30)( 21 – 6) = 15 $\times$ 15 = 225

 

Producer surplus = ½ $\times$ (30) (6-2) = 15 $\times$ 4 = 60