Explain why the combination of consumer and producer surplus not maximized if there is excess demand or supply

Question

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Answer 1

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 7, Problem 1QE

To determine

Explain why the combination of consumer and producer surplus not maximized if there is excess demand or supply

Expert Solution & Answer

Explanation of Solution

If there is either excess supply or excess demand, the number of traders will be lesser than if price were allowed to move to its equilibrium price. Thus, there is a loss of surplus in the market.

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Answer 2

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 7, Problem 1QE

To determine

Explain why the combination of consumer and producer surplus not maximized if there is excess demand or supply

Expert Solution & Answer

Explanation of Solution

If there is either excess supply or excess demand, the number of traders will be lesser than if price were allowed to move to its equilibrium price. Thus, there is a loss of surplus in the market.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 7, Problem 1QE

To determine

Explain why the combination of consumer and producer surplus not maximized if there is excess demand or supply

Expert Solution & Answer

Explanation of Solution

If there is either excess supply or excess demand, the number of traders will be lesser than if price were allowed to move to its equilibrium price. Thus, there is a loss of surplus in the market.

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Answer 4

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 7, Problem 1QE

To determine

Explain why the combination of consumer and producer surplus not maximized if there is excess demand or supply

Expert Solution & Answer

Explanation of Solution

If there is either excess supply or excess demand, the number of traders will be lesser than if price were allowed to move to its equilibrium price. Thus, there is a loss of surplus in the market.

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Answer 5

Chapter 7, Problem 1QE

To determine

Explain why the combination of consumer and producer surplus not maximized if there is excess demand or supply

Expert Solution & Answer

Explanation of Solution

If there is either excess supply or excess demand, the number of traders will be lesser than if price were allowed to move to its equilibrium price. Thus, there is a loss of surplus in the market.

Answer 6

Chapter 7, Problem 1QE

To determine

Explain why the combination of consumer and producer surplus not maximized if there is excess demand or supply

Expert Solution & Answer

Explanation of Solution

If there is either excess supply or excess demand, the number of traders will be lesser than if price were allowed to move to its equilibrium price. Thus, there is a loss of surplus in the market.

Answer 7

Chapter 7, Problem 1QE

To determine

Explain why the combination of consumer and producer surplus not maximized if there is excess demand or supply

Answer 8

Expert Solution & Answer

Explanation of Solution

If there is either excess supply or excess demand, the number of traders will be lesser than if price were allowed to move to its equilibrium price. Thus, there is a loss of surplus in the market.