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January 16th, 2014, 09:49 PM   #1
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Consumer's surplus

Q. The demand & supply functions respectively are:

Find the consumer surplus if the demand and price are determined under perfect competition.

I tried to solve this problem as follows:-

Under perfect competition, the equilibrium condition is

At x=11, price(p)= 25
At x=2, price(p)= 16

At x=11 & p=25, the consumer's surplus turns out negative, while
at x=2 & p= 16, the consumer's surplus is positive.

So what should I conclude? Should I write the conclusion as follows?

Since at x=11 & p=25 the consumer's surplus is negative, (11,25) can't be the equilibrium point. Hence the equilibrium point is (2,16) where the consumer's surplus is 56/3 units.
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consumer, surplus

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