Gianan, Angelica M.

Sep 12, 2021

MBA 602

A. The market or equilibrium price is $37.50. The intersection of Supply and Demand
line is the equilibrium price.
B. The economic value of the 10,000th unit is $42.50, and the minimum price producers
will accept to produce this unit is $30.
C. When 10,000 units are produced and consumed, total consumer surplus is $100,000,
and total producer surplus is $150,000.
Solution for Consumer Surplus: compute the vertical distance between demand
and market price must be summed for all 10,000 units. Total consumer surplus for
10,000 units is the area below demand line and above market price. See points (bcfg)
first find the distance of point g to f which is 10,000. After that, find the average of the
sum of line bg and line cf.
Formula: Base ((Difference of line bg + Difference of line cf)/2)
= 10,000((15+5)/2) = 10,000 (20/2) = 10,000 (10) = 100,000
 Solution for Producers Surplus: Inverse of consumer surplus formula. See points
(gfde).
Formula: Base ((Difference of line ge + Difference of line fd)/2)
=10,000((22.5 + 7.50)/2) = 10,000 (30 / 2) = 10,000 (15) = 150,000
D. At the market price in part a, the net gain to consumers when 10,000 units are
purchased is $12,500.
Formula: Total consumer surplus – total consumer surplus in market equilibrium
TCS in Market Equilibrium (112,500– 100,000) = $12,500 (area of triangle
A-f-c)
E. At the market price in part a, the net gain to producers when they supply 10,000 units
is $18,750.
Formula: Total producer surplus – total producer surplus in market equilibrium
TPS in Market Equilibrium (168,750 – 150,000) = $18,750 area of triangle
A-f-d)

F. The net gain to society when 10,000 units are produced and consumed at the market
price is $250,000, which is called Social Surplus.
Formula: Add total consumer surplus and total producer surplus.
=100,000 + 150,000 = $250,000
G. In market equilibrium, total consumer surplus is $112,500, and the total producer
surplus is $168,750.
Formula: for consumer surplus = ½ Base * Height (triangle A-g-b) = 0.5 (15,000 *
15) = 0.5 * 225,000 = $75,000
For producer surplus = ½ Base * Height (triangle A-g-e) = 0.5 (15,000 *
22.5) = 0.5 * 337,500 = $168,750.
H. The net gain to society created by this market is $281,250.
Solution: Total consumer surplus + total producer surplus (in market equilibrium)
Formula: 112,500 + 168,750 = 281,250