00:01
Here we're given a demand and supply equation.
00:02
So let's do what we normally do and start by graphing the situation, right? it never hurts to illustrate clearly what you're doing.
00:09
The demand curve starts at 180 and slopes down.
00:12
That's demand.
00:13
The supply curve starts at 40 and slopes up.
00:17
That's the supply curve.
00:18
They're both straight lines.
00:19
To find the equilibrium, we set the prices equal to each other, right? i can equate these and set 40 plus three cube.
00:30
Is equal to 180 minus 4 q that gives me 7 q is equal to 140 that gives me q equals 20 if i want to find the price i sub back in so i get the price of 180 minus 4 times 20 which is equal to 100 but if i want to sub into the other equation too i can sub into the supply curve and i'll get 100 as well by putting that cue back in either function.
00:56
So that gives me a quantity of 20 and a price of 100.
01:04
The consumer surplus, of course, is this area above the price and below the demand curve, showing the benefits from market participation.
01:12
And same thing with the producer surplus, right? the producer surplus is the difference between the price and the willingness to sell, capturing the benefits from trafficking in the marketplace.
01:22
These things are both triangles...