Figure 4-6 Figure 4-6 shows the market for granola. The market is initially in equilibrium at a price of P₁ and a quantity of Q₁. Now suppose producers decide to cut output to Q₂in order to raise the price to P_2.
-Refer to Figure 4-6. What area represents the deadweight loss at the equilibrium price of P₁?

Question

Figure 4-6

Figure 4-6 shows the market for granola. The market is initially in equilibrium at a price of P₁ and a quantity of Q₁. Now suppose producers decide to cut output to Q₂in order to raise the price to P_2.
-Refer to Figure 4-6. What area represents the deadweight loss at the equilibrium price of P₁?

Quizplus · Accepted Answer

At the equilibrium price P1, the market is in balance, meaning supply equals demand, and there is no deadweight loss. Deadweight loss occurs when the market is not at equilibrium, such as when there are price floors, ceilings, or other inefficiencies.

Figure 4-6 Figure 4-6 Shows the Market for Granola