Alright, now let's calculate consumer and producer surplus when we're given equations and we have to use just a little bit of algebra. Let's do it. Alright, so when we're calculating consumer and producer surplus, at least in this video, we're only going to deal with equilibrium. We're going to be at equilibrium calculating consumer surplus, but I just want to point out that in step 1, this is something we've done in a previous video. This is finding the equilibrium price and quantity using a little bit of algebra and we've done that before. I suggest if you don't remember how to do that to watch that video again, but we're going to do it in an example here just to reiterate. Alright? And in step 2, I want to note this term, axis price that I'm using. So find the axis price when quantity demanded equals 0. I made up this term; that's not the real term. That's kind of how I think about it. So let me just show you what I mean over here before we get to the example. I'm going to draw a little example standard supply-demand curve graph, excuse me, a graph over here. So let's say we've got our supply and demand right there, right, and we've got our equilibrium. So this is our price axis, our quantity axis, right? We've got our equilibrium price right here P star and our equilibrium quantity right here Q star, right? and notice that, to calculate our areas of our producer and consumer surplus, so if this is our consumer surplus right here, right, the area below the demand curve, above the market price, this triangle right here, to calculate that we're going to need this price way up here where the demand curve is crossing the axis, and that's what I call the axis price, the demand axis price right there, Right. And then down here, we're also going to be solving when we do our producer surplus, we're going to need this point where the supply curve is crossing the price axis right there, right? This point right here where
5. Consumer and Producer Surplus; Price Ceilings and Floors
Quantitative Analysis of Consumer and Producer Surplus at Equilibrium
5. Consumer and Producer Surplus; Price Ceilings and Floors
Quantitative Analysis of Consumer and Producer Surplus at Equilibrium - Online Tutor, Practice Problems & Exam Prep
Let's calculate consumer and producer surplus when we are given equations for supply and demand. Algebra time!
1
concept
Quantitative Analysis of Consumer and Producer Surplus
Video duration:
17mVideo transcript
2
Problem
ProblemThe supply and demand curves for a product are as follows. What is consumer surplus in this market?
QD = 15 - 2P
QS = -15 + P
A
6.25
B
12.5
C
20
D
22.5
E
25
3
Problem
ProblemThe supply and demand curves for a product are as follows. What is producer surplus in this market?
QD = 15 - 2P
QS = -15 + P
A
6.25
B
12.5
C
15
D
20
E
25
