Consider a perfectly competitive market with market supply $Q ^ { s } = - 2 + P$ and market demand $Q ^ { d } = 30 - P$. What is consumer surplus in this market?

Question

Quizplus · Accepted Answer

Consumer surplus is the area between the demand curve and the price level, up to the quantity traded. To find the equilibrium price and quantity, set $Q^s = Q^d$: $-2 + P = 30 - P$, solving this gives $P = 16$ and $Q = 14$. The demand curve intercepts the price axis at $P = 30$, so the consumer surplus is the area of a triangle with base $30 - 16 = 14$ and height $14$, thus $\frac{1}{2} \times 14 \times 14 = 98$.

Consider a Perfectly Competitive Market with Market Supply Qs=−2+PQ ^ { s } = - 2 + PQs=−2+P

Consider a Perfectly Competitive Market with Market Supply $Q ^ { s } = - 2 + P$