The demand and supply functions for haggis in the local markets are: Qd =20000-833p and Qs= 5000+ 417P.
A. calculate consumer and producer surplus in the market.
B. If the minimum wage is increased by $2 per hour, the new market supply curve becomes Q's =4000+417p. Calculate the loss in consumer and producer surplus due to this change
Economics - Financial Markets
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Let-s talk bout the approach to the answer here. First, you know that if you send the Demand function and Supply function equal to each other and then solve for P and Q, you will have the equilibrium point or EPrice and EQuantity.
Now the Consunsumeer Surplus is the traingle of space above the Equilibrium price so you need to solve for the area of the triangle above the EPrice but below the Demand curve from zero to the point of EQuantity.
Now if you add $2 to the labor you have the new Supply curve. So again solve for the new Equilibrium, calculate the Consumer Surplus under these conditions, and then subtract that Consumer Surplus from that which you computed in the original secnario and you will have your answer. Try it and let me know how it comes out. wmw