The diagram to the right shows a market in which a price flo

The diagram to the right shows a market in which a price floor has been imposed. Identify the following (enter all values as integers). The deadweight loss is $ . The transfer of consumer surplus to producers in $ . Producer surplus with this price floor is $ . Consumer surplus with this price floor is $ .

Solution

a.)After price floor,Deadweight loss=area C

=(1/2)(30000-15000)(5.75-4.75)=7500

b.)Initially at price 4.75,Consumer surplus=A+B+C

After price floor,consumer surplus=A

Deadweight loss=C

Area B is tranferred to producer.

B=15000(5.75-4.75)=15000

c.)After price floor,Producer surplus=B+D+F

B+D=15000(5.75-3.75)=30000

F=(1/2)(15000)(3.75-2.75)=7500

PRODUCER SURPLUS=30000+7500=37500

d.)Consumer surplus after price floor=A=(1/2)(15000)(6.75-5.75)=7500