Below, you have the formulas for the demand curve and the supply curve for jars

Question

Below, you have the formulas for the demand curve and the supply curve for jars of peanut butter. If you plug any price into the formula for the demand function, you get the quantity demanded at that price. If you plug any price into the supply function, you get the quantity supplied at that price. The Demand Function for peanut butter: The Supply Function for peanut butter: Q# Task 1: In the space below, sketch out the demand and supply curves for jars of pea nut butter. Remember to place "Jars of Peanut Butter" on the horizontal axis and "Price" on the vertical axis. 9 surplus 3.6 Prrduce Surplus Task 2: What is the equilibrium price and quantity in this market? Task 3: In your graph above, shade the area that represents consumer surplus in red. Task 4: In your graph above, shade the area that represents producer surplus in blue

Explanation / Answer

(Task 1) The graph is correctly drawn.

From demand function,

When Q = 0, P = 9 (Vertical intercept) & when P = 0, Q = 9 (Horizontal intercept).

From supply function,

When Q = 0, P = 0 (Vertical intercept).

(Task 2) In equilibrium, quantity demanded equals quantity supplied.

9 - P = P/2

18 - 2P = P

3P = 18

P = 6

Q = 9 - 6 = 3

(Task 3) You've shaded consumer surplus (CS) as a correctly placed triangle. CS is the area between demand curve and equilibrium price. But coordinates are not correct. The 3 coordinates of the CS triangle will be: (P = 9, Q = 0), (P = 6, Q = 3) and (P = 6, Q = 0).

(Task 4) You've shaded producer surplus (PS) as a correctly placed triangle. PS is the area between demand curve and equilibrium price. But coordinates are not correct. The 3 coordinates of the PS triangle will be: (P = 6, Q = 0), (P = 6, Q = 3) and (P = 0, Q = 0).

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