Tuesday, 28 March 2017

Consumer Surplus

The domestic market of good X is described by the equations: Qd = 200 - P & Qs = 20 + 2P. Calculate the consumer surplus.



Consumer surplus (CS) is defined as the difference between what consumers are willing and able to pay and what they actually pay in order to purchase the good or service.
In this case the CS = (140 x 140)/2 = $9.800

Indirect Tax (ad valorem)

The domestic market of good X is described by the equations: QD = 200 - P & Qs = 20 + 2P.  The government decides to intervene in the m...