When there is no government price control:
- Consumer surplus is $80
- Producer surplus is $80
- Social surplus is $160 and there is no deadweight loss.
When a price floor of $9 is imposed:
- Consumer surplus is $10
- Producer surplus is $65
- Deadweight loss is $90
- Social surplus is $70
The difference in total surplus before and after the price control is $90, which is equal to the deadweight loss.
When there is no government price control:
- Consumer surplus is $80
- Producer surplus is $80
- Social surplus is $160 and there is no deadweight loss.
When a price floor of $9 is imposed:
- Consumer surplus is $10
- Producer surplus is $65
- Deadweight loss is $90
- Social surplus is $70
The difference in total surplus before and after the price control is $90, which is equal to the deadweight loss.
When there is no government price control:
- Consumer surplus is $80
- Producer surplus is $80
- Social surplus is $160 and there is no deadweight loss.
When a price floor of $9 is imposed:
- Consumer surplus is $10
- Producer surplus is $65
- Deadweight loss is $90
- Social surplus is $70
The difference in total surplus before and after the price control is $90, which is equal to the deadweight loss.
When there is no government price control:
- Consumer surplus is $80
- Producer surplus is $80
- Social surplus is $160 and there is no deadweight loss.
When a price floor of $9 is imposed:
- Consumer surplus is $10
- Producer surplus is $65
- Deadweight loss is $90
- Social surplus is $70
The difference in total surplus before and after the price control is $90, which is equal to the deadweight loss.
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17. What is the size of social surplus when there is no government price control?
The sum of consumer surplus and producer surplus is social surplus, also referred to as economic surplus or total surplus.
The size for consumer surplus before price ceiling is
= ½(bh) = ½ (2-0)*(8-6) = $2 The size for producer surplus before price ceiling is = ½ (BH) = ½ (2-0) *(6-4) =$2 thus, the sum of consumer and producer surplus when there is no price control = consumer surplus + producer surplus =2+2 =$4 18. What is the size of deadweight loss when there is no government price control? We can calculate, Dead weight loss = (new price – old price) *(original quantity –new quantity) 2
19. What is the size of consumer surplus when a price ceiling of $5 is imposed? Consumer surplus when there is price ceiling of $5 = [½(BH)] + [(WL)] = [½ (1-0) (8-7)] + [(1-0) (7-5)] =$ 2.5 Thus,, size of consumer surplus when there is $5 price ceiling is $2.5
20. What is the size of producer surplus when a price ceiling of $5 is imposed?
The producer surplus when there is price ceiling is $5
= ½ (BH) = ½ [(1-0) (5-4)] = $0.5 Thus, the size of the producer surplus is $0.5 when there is $5 price ceiling.
21. What is the size of deadweight loss from a price ceiling of $5?
Deadweight loss = ½ (BH)
= ½ (2x1) =$1 Thus, the size of deadweight loss from price ceiling of $ 5 is $ 1 22. What is the size of social surplus when a price ceiling of $5 is imposed?
The social surplus = consumer surplus+ producer surplus
= 2.5 + 0.5 =$3 Thus, the size of social surplus when a price ceiling of $5 is imposed is $ 3.
23. What is the difference between total surplus before and after price control is imposed? How does this number compare to the deadweight loss?
Total surplus before price control is imposed is= 4
Total surplus when price control is imposed is=3 Thus, the difference between total surplus before and after price control is imposed =4-3 =1 Dead weight loss
Triangle 1 + triangle 2 (b*h) + (b*h) =1*(1/2) +1*(1/2) =1 Therefore, C.S is equal to dead weight loss after price price control. Use the following information to answer questions 24 through 32:
The graph below shows the supply and demand curves for beer.
24. What is the size of consumer surplus when there is no government price control?
Consumer surplus when there is no government price control
= (b*h) = (40*4) = 80 Therefore, the size of consumer surplus when there no government price control is $ 80
25. What is the size of producer surplus when there is no government price control? Producer surplus when there is no government price control = (b*h) = (40*4) = $ 80 Therefore, the size of producer surplus when there no government price control is $ 80
26. What is the size of social surplus when there is no government price control? What is the size of deadweight loss when there is no government price control? Social surplus = consumer surplus + producer surplus = 80+80 =160 Therefore, there will be no deadweight loss when there is no government price control.
27. What is the size of consumer surplus when Price Floor of $9 is imposed?
Consumer surplus when there is $9 price floor is imposed
= (b*h) = (10*1) = 10
28. What is the size of producer surplus when Price Floor of $9 is imposed?
The producer surplus when there price floor is $9= (b*h) + (l*w) = (10*1) + (6*10) = 65 Therefore the size of producer surplus is $ 65 when price floor of $9 is imposed. 29. What is the size of deadweight loss from Price Floor of $9?
Dead weight loss = (b*h)
= (6*30) = 90 Therefore, the size of deadweight loss from price floor of $9 is 90
30. What is the size of social surplus when Price Floor of $9 is imposed?
Social surplus= C.S+P.S
=5+65 =70
31 What is the difference between total surplus before and after price control is imposed? Before Price Control is imposed consumer surplus
½(b*h) = ½ (40*4) =80
Producer surplus ½ (b*h) = ½ (40*4) =80 Total surplus =Consumer surplus+ Producer Surplus = 80+80 = 160 After Price control is imposed Consumer surplus
½ (b*h) = ½ (10*1) =5
Producer surplus = ½ (b*h) + (L*W) = ½ (10*1) + (6*10) =65 Total surplus = Consumer surplus+ producer surplus =5+65 =70 Difference between total surplus before and after Price control is imposed = 160-70 = 90 Therefore, the difference between total surplus before and after P.C imposed is 90.
32. How does this number compare to the DWL?
D.W.L = ½ (b*h) = ½ (6*30) =90 Therefore, D.W.L is equal to total surplus
