What is the equilibrium quantity and equilibrium price for the following demand

Question

What is the equilibrium quantity and equilibrium price for the following demand and supply curves:

QD=5800-6p and QS= 4P-120

Calculate consumer and producer surplus in this market.

If a price floor of $600 is placed on this good, what is the new equilibrium price and quantity? Calculate the amount of any shortage or surplus. What is the change in consumer surplus?

If a price ceiling of $500 instead of a price floor were placed on this good, what is the new equilibrium price and quantity? Calculate the amount of any shortage or surplus. What is the change in producer surplus?

Explanation / Answer

to get equilibrium levels

QD=QS

5800-6p=4p-120

10p = 5920

p=592

Quanity will be when we put p=592

QD= 5800-6*592 = 2248

to calculate consumer surplus, first put QD=0

5800-6p=0

6p=5800

p=966.67

consumer surplus = 0.5*(966.67 - 592)*2248 = 421,129.08

for producer surplus

QS=0

4P-120=0

P=30

PRODUCER SURPLUS = 0.5*(592-30)*2248 = 631,688

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