Figure 4-6 Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?

Question

Figure 4-6  Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?

Quizplus · Accepted Answer

The shaded area ACD represents the transfer of consumer surplus to producer surplus. The height of the triangle is the difference between the price floor ($7.00) and the original equilibrium price ($4.00), which is $3.00. The base of the triangle is the difference between the quantity demanded at the original equilibrium price (12 million pounds) and the quantity supplied at the price floor (15 million pounds), which is 3 million pounds. Therefore, the value of the transferred surplus is (1/2) x $3.00 x 3 million pounds = $4.5 million or $1,200.

Figure 4-6 Figure 4-6 Shows the Demand and Supply