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

Question

Want to see more full solutions like this?

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.

Want to see more full solutions like this?

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

Students have asked these similar questions

Describe the various measures used to assess poverty and economic inequality. Analyze the causes and consequences of poverty and inequality, and discuss potential policies and programs aimed at reducing them, assess the adequacy of current environmental regulations in addressing negative externalities. analyze the role of labor unions in labor markets. What is one benefit, and one challenge associated with labor unions.

Evaluate the effectiveness of supply and demand models in predicting labor market outcomes. Justify your assessment with specific examples from real-world labor markets.

Explain the difference between Microeconomics and Macroeconomics? 2.) Explain what fiscal policy is and then explain what Monetary Policy is? 3.) Why is opportunity cost and give one example from your own of opportunity cost. 4.) What are models and what model did we already discuss in class? 5.) What is meant by scarcity of resources?

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.

Want to see more full solutions like this?

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.

Want to see more full solutions like this?

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

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.

Want to see more full solutions like this?

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

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.