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Lecture 3 Tutorial

The document discusses a tutorial problem involving the market for McWilly burgers across 5 districts. It asks the student to calculate market supply and demand at different price levels, find the equilibrium price and quantity, and plot the supply and demand curves. It then asks the student to calculate consumer and producer surplus at the equilibrium price and at restricted prices of RM17 and RM6.5, and determine the deadweight loss in each restricted price case.

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9 views

Lecture 3 Tutorial

The document discusses a tutorial problem involving the market for McWilly burgers across 5 districts. It asks the student to calculate market supply and demand at different price levels, find the equilibrium price and quantity, and plot the supply and demand curves. It then asks the student to calculate consumer and producer surplus at the equilibrium price and at restricted prices of RM17 and RM6.5, and determine the deadweight loss in each restricted price case.

Uploaded by

jahsonjackc
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Microeconomics, SJ14103
Lesson 3 Tutorial Discussion: Consumer and Producer Surplus
Semester 1, 2023/2024

(Note: This tutorial problem is an expansion from Tutorial 2; please note that repeating the
exercise of market equilibrium is also good for you. If you did not use a ruler to draw the
graph in Tutorial 2, please use a ruler this time.)

Consider a market of five districts in Village Willy. The following quantity demanded and
supplied for McWilly burger set were collected from the five districts in 7 years. The price
increased each year from RM10 to RM16, consequently the quantity demanded in each
district changed every year. Based on the information provided in Tables 1 and 2, answer
all questions below.

Quantity Supplied
Price (RM)
District 1 District 2 District 3 District 4 District 5
10 10 20 20 25 45
11 13 23 23 28 48
12 14 27 27 31 51
13 17 30 30 34 54
14 20 33 33 37 57
15 23 36 36 40 60
16 26 39 39 43 63
Table 1

Quantity Demanded
Price (RM)
District 1 District 2 District 3 District 4 District 5
10 85 35 40 30 50
11 72 32 37 27 47
12 59 29 34 24 44
13 46 26 31 21 41
14 33 23 28 18 38
15 20 20 25 15 35
16 7 17 22 12 32
Table 2
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Part A:

1. Calculate the market supply at each price level.


2. Calculate the market demand at each price level.
3. Find the market demand and supply functions.
4. Solve the two functions to obtain the market equilibrium price and quantity.
5. Plot the market supply and demand curves using price–quantity graph (use a graph
paper). Determine the market equilibrium price and quantity.

Part B:

6. Replot the graph from Part A using a simplified graph. (Use an A4 line paper.
Indicate clearly the equilibrium price and quantity.)
(Definition of simplified graph: A graph that does not use fully specified x-y scale
units. Thus, a graph paper is not required. Check the examples below.)

A simplified graph
- Although this graph is not fully
scaled, it can highlight specific
A fully scaled graph information as we can identify
from the fully scaled graph.

(Note: Avoid using a gap on the y- and/or x-axis, as it will cause confusion as you locate the
intercept points, as you can see from the fully scaled graph above.)

7. Find the consumer and producer surplus.


8. If the market price is restricted at RM17, find the consumer and producer surplus.
9. If the market price is restricted at RM6.5, find the consumer and producer surplus.
10. From questions 8 and 9, find the deadweight loss for each case.
(Notes: Handwriting is acceptable for tutorial exercises.)

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