Suppose the following demand and supply function:
Qd = 750 – 25P
Qs = -300 + 20 P
i. Find equilibrium price and quantity
ii. Find consumer and producer surplus
i. In equilibrium Qd = Qs, so:
750 – 25P = -300 + 20P,
45P = 1,050,
P = 23.33,
Q = -300 + 20*23.33 = 166.67 units.
ii. Consumer surplus is:
"CS = 0.5*166.67*(30 - 23.33) = 555.85."
Producer surplus is:
"PS = 0.5*166.67*(23.33 - 15) = 694.18."
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