17.2.3 Exploration 17B: Consumers’ and Producers’ Surplus at Market Equilibrium

1. Bring up the file Exploration 17B.xls [.rda]. This file contains data from consumer and producer market surveys of a particular company’s products. Find the equations for the demand function and the supply functions.

   D(x) =

   S(x) =

2. How do you find the point where market equilibrium occurs? (Hint: Use the difference of the demand and supply functions in Goal Seek as described in the How To Guide.)

   x =

   p =

3. Compute the consumers’ and suppliers’ surplus at market equilibrium (x,p).
4. Graph CS, PS, and p = p on the same axes where p is the equilibrium price (see the How To Guide).
5. Suppose the figure below illustrates the consumers’ and producers’ surplus at market equilibrium of a different commodity than above. Sketch the horizontal line p = p_L, where p_L is the established price of a commodity that is lower than the equilibrium price p. What are the implications for the company in this situation?

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   Figure 17.8: Graph for exploring what happens if the established price is lower than market equilibrium.

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6. The figure below illustrates the consumers’ and producers’ surplus at market equilibrium. Sketch the horizontal line p = p_H, where p_H is the established price of a commodity that is higher than the equilibrium price p. What are the implications for the company in this situation?

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   Figure 17.9: Graph for exploring what happens if the established price is higher than market equilibrium.

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