Do: Quantity Analyzing the Effect of a Price Floor on Consumer and Producer Surplus The figure illustrates a market in equilibrium. Use the figure to answer the following questions: 1) Suppose that each notch along the vertical axis represents a $10 increment, so that P, is $30. Suppose also that each notch along the horizontal axis represents 100 units of quantity, so that Q, is 300. Calculate the amounts of consumer and producer surplus in the market. Price

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A: Economic surplus refers to the sum of consumer surplus and producer surplus.

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A:

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A:

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Market Surplus and Shortage Analysis

In everyday language, a “surplus” indicates that there is an excess of something, while a “shortage” means that there is a scarcity of it. In economics, “market surplus” refers to the condition where the quantity of a certain good more available than what is required or “demanded” by the market. In the same way, a “market shortage” refers to the condition where the quantity of a certain good is less available than what is “demanded” by the market. If quantity in demand is written as Qd and quantity that is supplied is written as Qs, then, the condition Qs > Qd indicates market surplus and condition Qd > Qs indicates market shortage.