Question
Could you please tell me what's wrong with my solution? The question is: Consider a competitive market where market demand is given by: Qd =
Could you please tell me what's wrong with my solution?
The question is:
Consider a competitive market where market demand is given by:
Qd = 54 - P/2
where Qd is the quantity demanded and P is the price.
Assume that the market supply curve is given by the following:
Qs = P - 3
What is the value of the producer surplus in the competitive market equilibrium?
Draw the market diagram to check whether your answer makes sense. Work with 2 decimals in your calculation (e.g., for P* and Q*). If your answer involves more than 2 decimal places, please round your answer to 2 decimal places (e.g., 24.03).
Below is my working:
Qd=Qs at equilibrium
So 54-p/2 = p-3
p+2/p=54+3
3p/2=57, p=38
when p=38, q=38-3=35.
If I draw it on a graph, for PS, trapezium is made, and using the formula for trapezium:
(3+38)*35*0.5=717.5
But this answer is wrong, could you tell me what's wrong with my solution in detail?
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