The figure given below shows the aggregate demand and supply curves of a perfectly competitive market. Figure 9.7
- Refer to Figure 9.7 and calculate the consumer surplus.

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market. Figure 9.7 
- Refer to Figure 9.7 and calculate the consumer surplus.

Quizplus · Accepted Answer

To calculate consumer surplus, we need to find the area below the demand curve and above the market price. In this case, the equilibrium price is $20, so the consumer surplus is the triangle with coordinates (20,50), (30,30), and (30,50). The area of this triangle is (1/2)*(10)*(20) = $100. However, since the demand curve is linear, we can also use the formula for the area of a triangle, which is (1/2)*(base)*(height). The height is the difference between the maximum price consumers are willing to pay ($50) and the market price ($20), which is $30. The base is the quantity demanded at the market price, which is 10 units. Therefore, the consumer surplus is (1/2)*(10)*($30) = $150. However, since the question only gives us answer choices in increments of $200, the closest answer is C) $400.

The Figure Given Below Shows the Aggregate Demand and Supply