Consider the market for outdoor porch swings. The following graph shows the supply and the demand curve of the good. Assume that the price of home and garden goods is regulated, and the price of outdoor swings cannot exceed Preg, also shown on the graph below. The letters A to K denote certain areas on the graph. Is there a surplus or a shortage at the regulated price? What area represents the CS at the regulated price? What about PS? What about TS? Given the regulation, is there a DWL? If yes, what area represents this DWL?
Consider the market for outdoor porch swings. The following graph shows the supply and the
Is there a surplus or a shortage at the regulated price? What area represents the CS at the regulated price? What about PS? What about TS? Given the regulation, is there a DWL? If yes, what area represents this DWL?
The total surplus in a market is a computation of the total well-being of all participants in a market. It is the sum of CS and PS. CS is the difference between willingness to pay for a product and the price that consumers pay for it.
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