Assume the market depicted in the graph is in equilibrium at demand (D) and supply (S₁). Total surplus is: A) greater than it is when the market is in equilibrium at D and S₂. B) less than it is when the market is in equilibrium at D and S₂. C) the same as it is when market is in equilibrium at D and S₂. D) zero.

Question

Quizplus · Accepted Answer

The total surplus is represented by the area above the supply curve and below the demand curve. When the market shifts from S₁ to S₂, the equilibrium price decreases and the equilibrium quantity increases, resulting in a larger total surplus. Therefore, the total surplus is less in the given market equilibrium.

Assume the Market Depicted in the Graph Is in Equilibrium