Figure 4-6

Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.
-Refer to Figure 4-6.What area represents consumer surplus after the imposition of the price floor?

Question

Figure 4-6
  
Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.
-Refer to Figure 4-6.What area represents consumer surplus after the imposition of the price floor?

Quizplus · Accepted Answer

Consumer surplus is represented by the area above the equilibrium price and below the demand curve. After the imposition of the price floor, the new price (Pf) is higher than the equilibrium price, causing a decrease in quantity demanded and an increase in quantity supplied. Therefore, the new quantity transacted is lower than the equilibrium quantity. The consumer surplus is reduced to the area above the new equilibrium quantity (Qf) and below the demand curve, which is represented by area D. Areas A, B, E, and F represent deadweight loss caused by the price floor.

Figure 4-6 Figure 4-6 Shows the Demand and Supply Curves for the and Supply