Consider a market in which Bert from problem 4 is the buyer...

Consider a market in which Bert from problem 4 is the buyer and Ernie from problem 5 is the seller. a. Use Ernie's supply schedule and Bert's demand schedule to find the quantity supplied and quantity demanded at prices of 2dollar, 4dollar, and 6dollar. Which of these prices brings supply and demand into equilibrium? b. What are consumer surplus, producer surplus, and total surplus in this equilibrium? c. If Ernie produced and Bert consumed one fewer bottle of water, what would happen to total surplus? d. If Ernie produced and Bert consumed one additional bottle of water, what would happen to total surplus?

Transcript

00:01 Hello, in this video i will be explaining the following.

00:04 So we're going to use the bert and ernie from other questions.

00:09 I went ahead and i found those questions and if these are not your numbers then hopefully you can use this as a guide.

00:17 So looking at those other questions you can see that the quantity demanded from bert's demand schedule is 3, 2, and 1.

00:29 And our quantity supplied from ernie's supply schedule is 1, 2, 3.

00:38 So looking at this we can see that the equilibrium is $4 because the quantity demanded is equal to quantity supplied.

01:06 So moving on, let's go to our next question.

01:08 I'll go ahead and change the color to keep everything easy to follow.

01:14 So b, what are the consumer surplus, producer surplus, and total surplus in this equilibrium? consumer surplus is the difference between willingness to pay and market price.

01:28 So i'm going to go ahead and write that down for us.

02:01 And then producer surplus, that is the difference between the market price and the cost of making.

02:33 And then finally our total surplus is the sum of both consumer and producer.

02:53 So now let's go ahead and solve for each little section.

03:11 Alright so first we'll do consumer surplus.

03:15 That's going to be 7 minus 4 plus 5 minus 4 equals $3 plus $1 which equals 4.

03:34 And then for the producer surplus it'll be 4 minus 1, 4 minus plus 4 minus 3 which is 3 plus 1.

03:46 So that's also 4...

Question

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