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

Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price paid for a good or service. In this case, the equilibrium price is $800 and the equilibrium quantity is 100.

To calculate the consumer surplus, we start from the equilibrium price and go up to the demand curve to find the quantity demanded, which is 150. The consumer surplus is the area between the demand curve and the equilibrium price, up to the quantity demanded.

The area can be calculated as:

(1/2) x (150-100) x ($1000-$800) = $400

Therefore, the consumer surplus is $400.

The Figure Given Below Shows the Aggregate Demand and Supply