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Draw a Free-Hand Diagram of a Market with a Downward

Question 41

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Draw a free-hand diagram of a market with a downward sloping demand curve and an upward sloping supply curve. On your diagram indicate (i) the equilibrium price; (ii) the consumer surplus and (iii) the producer surplus. Discuss what you would expect to see in terms of the process of price convergence to the equilibrium price if (iv) consumer surplus is larger than producer surplus; (v) consumer surplus is smaller than produce surplus and (vi) consumer surplus is equal to producer surplus.

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To draw the diagram, start by drawing a ...

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