With linear demand and supply curves, it is possible to solve for the consumer surplus using the
Question:
With linear demand and supply curves, it is possible to solve for the consumer surplus using the formula for the area of a triangle (area= ½
height × base). Suppose the demand curve is P D = 100 – 0.5Q and the supply price is horizontal at $40 (P S = $40). Note that the consumer surplus looks like a triangle. What is the total consumer surplus for this good?
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Solving P D P S or 100 05Q 40 Q will be 120 units and the market price wil...View the full answer
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