6 Use the figure below to answer questions ab 8 0 10 20 30 4

6. Use the figure below to answer questions a-b: 8 0 10 20 30 40 50 60 70 80 90 100 Quantity (thousands of pizzas per month) The figure above shows the supply and demand curves for pizza. What area in the graph above represents: a. consumer surplus? b. producer surplus? Mark the CS and PS in the graph

Solution

a. The consumer surplus is given by the area between the demand curve and the market price and so in this case this would be given by ABF.

b. The producer surplus is given by the area between the supply curve and the market price. This is given by the area BCF.