Assuming the market is in equilibrium in the graph shown with demand D and supply S₁,total surplus is: A) greater than total surplus when market is in equilibrium at D and S₂. B) less than total surplus when market is in equilibrium at D and S₂. C) the same as total surplus when market is in equilibrium at D and S₂. D) zero.

Question

Quizplus · Accepted Answer

At equilibrium point (where demand curve meets the supply curve), the market achieves the maximum total surplus which is equivalent to the sum of consumer and producer surplus. In the given graph, the equilibrium point is where D and S₁ intersect. At this point, the total surplus is represented by the area ABCE. If the market equilibrium were to shift to D and S₂, the total surplus would increase, resulting in a larger area of ABCDE. Therefore, the total surplus at D and S₂ is greater than the total surplus at D and S₁. Thus, option B is correct.

Assuming the Market Is in Equilibrium in the Graph Shown