Answer:
The consumer surplus is 225,000
The producer surplus is 112,500
Explanation:
According to the given data we have the following:
Demand equation: Qd = 2500 - 5P
Supply equation: Qs = 1OP - 500
Therefore, the equilibrium is at demand equal to the supply
2500-5P=10P-500
15P=3000
P=200
Q=10P-500=10*200-500=1500
The inverse demand function is
P=500-0.2Q
Therefore, CS=0.5*(Pmax -Pe)*Qe
=0.5*(500-200)*1500
=225,000
The consumer surplus is 225,000
Regarding PS, maximum price or y-intercept of the demand curve
Pe and Qe are equilibrium price and quantity the inverse supply curve
P=50+0.1Q
PS=0.5*(Pe-Pl)Qe
Pl=y intercept of supply curve
PS=0.5*(200-50)*1500
=112,500
The producer surplus is 112,500
