Figure 4-6 Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of consumer surplus after the imposition of the price floor?

Question

Figure 4-6  Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of consumer surplus after the imposition of the price floor?

Quizplus · Accepted Answer

After the price floor is set at $7.00, the new equilibrium point becomes where the quantity demanded is equal to the quantity supplied, which is at a quantity of 180 pounds and a price of $7.00. 
The area below the demand curve and above the equilibrium price ($9.00) up to the new price floor ($7.00) represents the consumer surplus loss. This area can be calculated as the area of the trapezoid, where the two parallel sides are $7.00 and $9.00, and the height is 180 pounds. 
The consumer surplus loss is (1/2) x ($2.00) x (180) = $180.
Thus, the value of consumer surplus after the imposition of the price floor is $1,800 - $180 = $1,500.

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