1)The demand and supply curves for bottled water are given by: Qd = 152 - 20P Qs
ID: 1130393 • Letter: 1
Question
1)The demand and supply curves for bottled water are given by: Qd = 152 - 20P Qs = 188P - 4 Q is measured in thousands of bottles of water. Tasks: Use this information to calculate the Consumer Surplus at the equilibrium price. Hint: To answer this question, you need to calculate the equilibrium price and quantity AND the demand choke price. Note: The demand choke price is the price at which quantity demanded is equal to zero. (Do NOT use the $ when entering your answer; just enter a numeric value.)
Explanation / Answer
Q = 152 - 20P
20P = 152 - Q
P = 7.6 - 0.05Q
Demand choke price = $7.6
For equilibrium
Qd = Qs
152 - 20P = 188P - 4
208P = 156
P = 156 / 208 = 0.75
Q = 152 - 20(0.75) = 137 (i.e. Q = 137,000)
CS = 0.5[(7.6 - 0.75) * 137,000]
= 469,225
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