Question 1195938


Demand: {{{P=500-25Q}}} 
Supply: {{{P=50+20Q}}}


i) Calculate the equilibrium price and Quantity  

An equilibrium price, also known as a market-clearing price, is the consumer cost assigned to some product or service such that supply and demand are {{{equal}}}, or close to equal.


{{{500-25Q =50+20Q}}}

{{{500-50 =25Q+20Q}}}

{{{450 =45Q }}}

{{{Q =450/45}}}

{{{Q =highlight(10) }}}


so Quantity is {{{10}}}

and the equilibrium price is

{{{ P=500-25*10}}}

{{{P=500-250}}}

{{{P= highlight(250)}}}



ii) Calculate the consumers’ and producers’ surplus 


Consumer Surplus: 

Consumer Surplus= {{{((500.00 - 250.00) * 10.00) / 2}}}

Consumer Surplus={{{highlight(1250.00)}}}


Producer Surplus:

Producer Surplus= {{{((250.00 - 50.00)* 10.00) / 2}}}

Producer Surplus={{{highlight(1000.00)}}}