Question

Suppose Manuel is the only seller in the market for bottled water and Hubert is the only buyer. The following lists show the value Hubert places on a bottle of water and the cost Manuel incurs to produce each bottle of water:
Hubert's Value Manuel's Costs
Value of first bottle: $10 Cost of first bottle: $1
Value of second bottle: $7 Cost of second bottle: $3
Value of third bottle: $3 Cost of third bottle: $7
Value of fourth bottle: $1 Cost of fourth bottle: $10
The following table shows their respective supply and demand schedules:
Price Quantity Demanded Quantity Supplied
$1 or less 4 0
$1 to $3 3 1
$3 to $7 2 2
$7 to $10 1 3
More than $10 0 4
Use Raphae's supply schedule and Larry's demand schedule to find the quantity supplied and quantity demanded at prices of $2, $5, and $8.
A price of____brings supply and demand into equilibrium.
At the equilibrium price, consumer surplus is_____producer surplus is_____, and total surp is_____.
If Raphael produced and Larry consumed one less bottle of water, total surplus would_____.
if instead, Raphael produced and Larry consumed one additional bottle of water, total surplus would_____.

Answer 1

Answer:

Manuel and Hubert

A price of__$5__brings supply and demand into equilibrium.

At the equilibrium price, consumer surplus is__$2___producer surplus is__$2___, and total surplus is__$4___.

If Manuel produced and Hubert consumed one less bottle of water, total surplus would__$6___.

if instead, Manuel produced and Hubert consumed one additional bottle of water, total surplus would_$6____.

Explanation:

a) Data and Calculations:

Hubert's Value                                 Manuel's Costs

Value of first bottle:      $10             Cost of first bottle: $1

Value of second bottle: $7              Cost of second bottle: $3

Value of third bottle: $3                   Cost of third bottle: $7

Value of fourth bottle: $1                 Cost of fourth bottle: $10

The following table shows their respective supply and demand schedules:

Price               Quantity        Quantity

                   Demanded     Supplied

$1 or less            4                    0

$1 to $3              3                     1

$3 to $7             2                    2

$7 to $10            1                    3

More than $10   0                   4

Using Manuel's supply schedule and Hubert's demand schedule to find the quantity supplied and quantity demanded at prices of $2, $5, and $8.

Price     Quantity      Quantity

         Demanded     Supplied

$2            3                 1

$5            2                2

$8            1                 3

At the equilibrium price:

Consumer Surplus = $7 - $5 = $2

Producer Surplus =   $5 - $3 = $2

Total surplus is $2 * 2 = $4