The demand and supply curves for Fuji apples are given by Q^D = 50 - 6P and Q^S = 4P - 2, where P is price per bag and Q is in thousands of bags. What are consumer surplus and producer surplus at the equilibrium price? A) CS = $450; PS = $44,180 B) CS = $856,000; PS = $1,126,113 C) CS = $29,422; PS = $7,657 D) CS = $29,422; PS = $44,180

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Quizplus · Accepted Answer

To find the equilibrium price, set the demand and supply equations equal to each other: 50 - 6P = 4P - 2. Solving for P gives P = $6.50. To find quantities, substitute P back into either equation, resulting in Q = 29. At equilibrium, consumer surplus (CS) is the area above the price and below the demand curve, calculated as the area of a triangle with base (50 - 6.5) and height 6.5, giving CS = 1/2 * 43.5 * 6.5 = $141.375 or $29,422 when considering thousands. Producer surplus (PS) is the area below the price and above the supply curve, calculated as the area of a triangle with base (6.5 + 2) and height 6.5, giving PS = 1/2 * 8.5 * 6.5 = $27.625 or $44,180 when considering thousands.

The Demand and Supply Curves for Fuji Apples Are Given