Brief Review

 

The Demand curve, D(q), is the blue curve.
The Supply curve, S(q), is the red curve.

p represents Price
q represents Quantity

 

 

(Place cursor over numbered circles to view features on the graph.)


Consumer's Surplus -- Total savings to consumers who are willing to pay a higher price than the equilibrium price p'.

Producer's Surplus -- Total savings to the producer who is willing to supply the product at a price lower than the equilibrium price p'.

(q', p') -- The equilibrium point.
q' -- The equilibrium quantity.
p' -- The equilibrium price.


Note: At the equilibrium point, (q', p'), the supply equals the demand.

Next: See how to turn Sam's problem into a system of equations in the "Solution Set-Up."

Study Abstract Solution Set-Up