Market demand is given as Q_D= 280 - 4P.Market supply is given as Q_S= 2P + 40.In a perfectly competitive equilibrium,what will be the value of consumer surplus

Question

Quizplus · Accepted Answer

In a perfectly competitive equilibrium, the market demand and supply curves intersect at a certain price and quantity. We will solve for this equilibrium to find the value of consumer surplus.

First, we set the market demand equal to the market supply:

280 - 4P = 2P + 40

Solving for P, we get:

P = 60

Substituting this value of P into either the demand or supply equation, we can find the equilibrium quantity:

Q = 280 - 4(60) = 40

Q = 2(60) + 40 = 160

To find the consumer surplus, we need to calculate the area below the demand curve and above the equilibrium price, up to the equilibrium quantity. This is a triangular area:

Consumer Surplus = 1/2 * (280 - 60) * (160 - 40) = $1800

Therefore, the best choice is C, with a consumer surplus of $1800.

Market Demand Is Given as QD = 280 - 4P

Market Demand Is Given as Q_D= 280 - 4P