Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Consider the following market for flash drives
Consider the following market for flash drives.
| Price ($) | Quantity supplied | Quantity demanded |
|---|---|---|
| 65 | 3,000 | 0 |
| 60 | 2,750 | 250 |
| 55 | 2,500 | 500 |
| 50 | 2,250 | 750 |
| 45 | 2,000 | 1,000 |
| 40 | 1,750 | 1,250 |
| 35 | 1,500 | 1,500 |
| 30 | 1,250 | 1,750 |
| 25 | 1,000 | 2,000 |
| 20 | 750 | 2,250 |
| 15 | 500 | 2,500 |
| 10 | 250 | 2,750 |
| 5 | 0 | 3,000 |
| 0 | 0 | 3,250 |
1. What is the consumer surplus in the equilibrium?
2. Suppose there is an increase in the cost of producing flash drives such that the quantity supplied decreases by 1,000 units for each price. What is the consumer surplus at the new equilibrium?
1)What is the consumer surplus in the equilibrium?
The equilibrium is at a price of $35 and a quantity of 1,500. At equilibrium, there is no consumer surplus, because all consumers pay what they are willing to pay to acquire the flash drive.
2. Suppose there is an increase in the cost of producing flash drives such that the quantity supplied decreases by 1,000 units for each price. What is the consumer surplus at the new equilibrium?
| Price ($) | Quantity supplied | Quantity demanded | New quantity supplied |
|---|---|---|---|
| 65 | 3,000 | 0 | 2000 |
| 60 | 2,750 | 250 | 1,750 |
| 55 | 2,500 | 50 | 1,500 |
| 50 | 2,250 | 750 | 1,250 |
| 45 | 2,000 | 1,000 | 1,000 |
| 40 | 1,750 | 1,250 | 750 |
| 35 | 1,500 | 1,500 | 500 |
| 30 | 1,250 | 1,750 | 250 |
| 25 | 1,000 | 2,000 | 0 |
| 20 | 750 | 2,250 | |
| 15 | 500 | 2,500 | |
| 10 | 250 | 2,750 | |
| 5 | 0 | 3,000 | |
| 0 | 0 | 3,250 |
The new equilibrium price is $45, and the new equilibrium quantity is 1,000. Again, there is no consumer surplus because all consumers paid what they were willing to pay to acquire the flash drives.
