![]() ![]() ![]() Drag the endpoints to the appropriate positions to identify the area of producer surplus. This will drop a small triangle with 3 endpoints onto the graph. Instructions: Use the tool provided PS to identify the area of producer surplus. Let us find consumer surplus for the same. In the graph below, identify the areas of consumer surplus and producer surplus. As per this price, car demand is 20 in equilibrium demand. ![]() Market price as per demand supply meet is $800,000. Example #3Ī consumer wants to buy a high-tech car with all advanced features, and he is ready to pay $1,000,000, which is the highest price among the customers, and other customers are willing to pay only $800,000. Now, let us give an example to understand the same. Now a line must be created between the market equilibrium price and ordinate.Īs we know, triangle ABC is consumer surplus, and area of the triangle that is Consumer Surplus:. As per the law of supply and demand, the market price is a point of intersection between the demand and supply curves. Now, put the market price in the equilibrium price. Firstly we need to draw a supply and demand curve with quantity on the horizontal axis and price on the vertical axis. Extended consumer surplus can be written as half of BC multiplied by AC or half of OQ multiplied by AC, as OQ and CB are parallel.Ĭonsumer and Producer Surplus in Perfect Competitionįormula for Extended Consumer Surplus can be expressed as:-Įxtended consumer surplus can be calculated this way. Points B and Q correspond to the quantity demand at equilibrium. Here, point A and C represent the maximum price the consumer is willing to pay the market price, respectively. In the below image of consumer and producer surplus in perfect competition, triangle ABC is consumer surplus, and another triangle ABC BCD reflects producer surplus. Now, let us see the extended consumer surplus formula. The company already has the initial price, and their subtraction will result in a consumer surplus. The formula for consumer surplus can be calculated by first checking the consumer base and the highest price the consumer is willing to pay. Here consumer has saved the same.Įxplanation of the Consumer Surplus Formula He went to an electronics store and found that the television with the features he wanted was for a price of $1,200.Ĭonsumer Surplus = Maximum Price Willing to Pay – Actual PriceĬonsumer surplus value is $300. Suppose a consumer wants a television with 44 inches LED TV with HD quality and is willing to pay $1,500 for it. So, the consumer surplus of auto dish cleaners is $500. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |