The demand equation for a certain product is p = 25 - 0.005q,where p is the price per unit (in dollars)for q units.If its supply equation is p = 1 + 0.03q,then the consumers' surplus when market equilibrium is established is
A) $1176.49
B) $1250.87
C) $1500.
D) $1675.30
E) $1800.

Question

Quizplus · Accepted Answer

To find the market equilibrium, set the demand equation equal to the supply equation: $25 - 0.005q = 1 + 0.03q$. Solving for $q$ gives the equilibrium quantity. Then, use either the demand or supply equation to find the equilibrium price. Consumers' surplus is the area of the triangle above the equilibrium price and below the demand curve, calculated as $\frac{1}{2} \times \text{base} \times \text{height}$, where the base is the equilibrium quantity and the height is the difference between the maximum price consumers are willing to pay (found from the demand equation when $q = 0$) and the equilibrium price.

The Demand Equation for a Certain Product Is P =