If the current market price is $8, average income is $40,000 and the demand curve is Qd = 120-4P +.001, how to you find the market’s total demand curve and market’s consumer surplus?

If the current market price is $8, average income is $40,000 and the demand curve is Qd = 120-4P +.001, how to you find the market’s total demand curve and market’s consumer surplus?

 

 

Answer:

Q = 120 – 4P + 0.001 * 40000 (Demand Curve Equation.)

Q = 120 – 4P + 40

Q = 160 – 4P

4P = 160 – Q

(Divide the above equation by 4).

P = 40 – 0.25 Q

8 = 40 – 0.25 Q (When Current Market Price is $ 8.)

0.25 Q = 32

Q = 32 / 0.25

Q = 128 Units.

Market’s total demand = 128 Units.

Market’s Consumer Surplus = 1 / 2 * Base * Height.

= 1 / 2 * (40 – 8) * 128

= 1 / 2 * 32 * 128

= 1 / 2 * 4096

= $ 2048.

Conclusion:- Market’s total demand = 128 Units and Market’s Consumer Surplus = $ 2048.

Asked on February 15, 2018 in economics.
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