Question 6 Suppose 3 P = P*; 3 Qd = Qs = Q* Numerically calculate the equilibrium price and quantity (Q*, P*) (you have done this in PS2) a) Find the numerical value of the consumer surplus. Make sure that you have shown all calculations. o) If consumers experience an income loss and the good is a normal good, suppose the new demand curve is given by QD = 260- 4P. Find the new consumer surplus. c) Draw a graph and show the new equilibrium, old equilibrium, new consumer surplus and the old consumer surplus.

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