Econ Graph 1 Econ Graph 2 The following dlagram shows supply

Econ Graph 1:

Econ Graph 2:

The following dlagram shows supply and demand In the market for computer keyboards. Use the black point (plus symbol) to Indicate the equilibrium price and quantity of computer keyboards. Then use the green point (triangle symbol) to fill the area representing consumer surplus, and use the purple point (diamond symbol) to fill the area representing producer surplus. 150 135 120 105 90 75 60 45 30 15 Producer Surplus 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Millions of keyboards) Total surplus In this market Is million.

Solution

Consumer surplus is measured as area below the demand curve and above the price while producer surplus is measured as area below the price and above the supply curve.

The equilibrium price and quantity is attained where market demand is equal to the market supply.

Here, equilibrium price is $75 and equilibrium quantity is 200 units.

Consumer surplus=1/2*200*(135-75)

=$6000

Producer surplus=1/2*200*(75-15)

=$6000

Total surplus= Consumer surplus+ Producer surplus

=$6000+$6000

=$12,000

b. This can be characterized as externality which is a market faiure. It\'s a market failure because markets do not function well in the presence of an externality. Market failure is when the equilibrium differs from free market equilibrium.