What are a consumer and a producer?

Consumer and Producer Surplus?

• Given the following demand and supply equations in the market for wheat, answer the following questions. Prices are in dollars, and quantities are in bushels. Demand: P=12 - (4/3)Qd Supply: P = 2 + (1/3)Qs 1. What level of production is necessary for allocative efficiency to occur? A) 4 B) 12 C) 8/6 D) 6 2. At equilibrium, what is the total surplus in the market for wheat? A) $30 B) $60 C) $24 D) $72 3. How much is consumer surplus and how much is producer surplus? A) Consumer Surplus = $24, Producer Surplus = $36 B) Consumer Surplus = $12, Producer Surplus = $12 C) Consumer Surplus = $24, Producer Surplus = $6 D) Consumer Surplus = $48, Producer Surplus = $24 4. Based on the same market, how many bushels of wheat would the government have to buy to support a price floor of $6 per bushel? A) 4.5 B) 6 C) 7.5 D) 8 5. Starting from equilibrium in the market above, if a tax of $1 is imposed on wheat producers, what will happen to the price consumers pay for wheat? A) price of wheat will rise by $1 B) price of wheat will rise by $0.50 C) price of wheat will rise by $0.80 D) price of wheat will fall by $1 I have the answers, but I just don't know how to figure them out! HELP PLEASE! Thanks

• Answer:

  .D=S 12-4/3=2+1/3Q Q=30/5=6 P=12-8=4 Consumer surplus=1/2(12-4)6=24 Producer surplus=1/2(4-2)6=6 1. D 2 A 3 C 4 B,P=6, then 6=2+1/3Q Q=12 The government has to buy =12-6=6 5. don't know. Based on the elasticity of demand and supply,the consumer will pay 20% of the tax,while the producer will pay 80% of the tax.The most possible is B. Check the tax incidence.