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bioboy12 bioboy12
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2 months ago
Market Equilibrium

The graph shows the market for elephant rides.
 

Assume that P1=$3.00, P2=$4.50, P3=$13.50, and Q1=3.75. At market equilibrium, what is the consumer surplus? What is the producer surplus? What is economic surplus? Please round your answer to two decimal places.

▸ $33.75, $2.81, $36.56

▸ $16.88, $8.44, $25.32

▸ $16.88, $2.81, $19.69

▸ $33.75, $8.44, $42.19
Textbook 
Macroeconomics

Macroeconomics


Edition: 3rd
Authors:
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paris.chenparis.chen
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More solutions for this book are available here
$16.88, $2.81, $19.69

Consumer surplus is equal to the area below the demand curve and above the market price.
Consumer surplus = 1/2 * base * height = 1/2 * (Q1 - 0) * (P3 - P2) = 1/2 * 3.75 * 9 = $16.88

Producer surplus is equal to the area above the supply curve and below the market price.
Producer surplus = 1/2 * base * height = 1/2 * (Q1 - 0) * (P2 - P1) = 1/2 * 3.75 * 1.5 = $2.81

Economic surplus is the sum of consumer surplus and producer surplus.
Economic surplus = consumer surplus + producer surplus = 16.88 + 2.81 = $19.69
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