Table 4-13

-Refer to Table 4-13. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of economic surplus in this market?

Question

Table 4-13
 
-Refer to Table 4-13. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of economic surplus in this market?

Quizplus · Accepted Answer

The value of economic surplus in this market is the sum of consumer surplus and producer surplus. Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. Producer surplus is the difference between the price producers receive for a good and the price they are willing to accept. In this case, the equilibrium price is $20 and the equilibrium quantity is 30 thousand units. The demand curve shows that consumers are willing to pay up to $30 for a unit of Aunt Maud's lotion. The supply curve shows that producers are willing to sell a unit of Aunt Maud's lotion for $10. Therefore, consumer surplus is $10 per unit, or $300 thousand in total. Producer surplus is $10 per unit, or $300 thousand in total. Therefore, the value of economic surplus in this market is $600 thousand.

Table 4-13 -Refer to Table 4-13. the Equations Above Describe the Demand