The following graph plots the supply and demand curves in the market for VR headsets. Use the black point (plus symbol) to indicate the equilibrium price and quantity of VR headsets. Then use the green point (triangle symbol) to fill the area representing consumer surplus, and use the purple point (diamond symbol) to fill the area representing producer surplus.

The following graph plots the supply and demand curves in the market for VR headsets. Use the black point (plus symbol) to indicate the equilibrium price and quantity of VR headsets. Then use the green point (triangle symbol) to fill the area representing consumer surplus, and use the purple point (diamond symbol) to fill the area representing producer surplus.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

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.

Question

The following graph plots the supply and demand curves in the market for VR headsets.
Use the black point (plus symbol) to indicate the equilibrium price and quantity of VR headsets. Then use the green point (triangle symbol) to fill the
area representing consumer surplus, and use the purple point (diamond symbol) to fill the area representing producer surplus.
PRICE (Dollars per headset)
350
315
280
245
210
175
140
105
70
35
0
0
Demand
Supply
40
80 120 160 200 240 280 320 360
QUANTITY (Millions of headsets)
Total surplus in this market is $
400
million.
+
Equilibrium
A
Consumer Surplus
Producer Surplus
?

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