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Producer/Consumer Surplus and Elasticity
Producer/Consumer Surplus and Elasticity
1. Refer to the graph above. The market represented here is in equilibrium when the price is:
(a) $5.00 per unit and 220 units are bought and sold.
(b) $8.15 per unit and 220 units are bought and sold.
(c) $5.00 per unit and 400 units are bought and sold.
(d) $3.65 per unit and 400 units are bought and sold.
2. Refer to the graph above. Assume the market is in equilibrium, calculate the consumer surplus.
3. Refer to the graph above. Assume the market is in equilibrium, calculate the producer surplus.
1
(a) Will gasoline consumption rise or fall?
(b) By how much (as a percentage)?
(c) How many barrels of oil will the U.S. consume with the price change?
(d) Will total revenue for gasoline manufacturers rise or fall? Explain why using supply, demand, and
elasticities.
(e) name a substitute good for gasoline. Will the price of that good increase or decrease with the
price change? Draw a graph to support your answer. (Note: Ethanol is really not a substitute
since ethanol contains gasoline.)
(f) Name a complementry good. Will the price of that good increase or decrease with the price
change? Draw a graph to support your answer.
You’re done!