The market for a case of wine has been described by the following supply and demand functions:
Supply: P = 10 + 4Q Demand: P = 100 – 5Q where P is the price in dollars and Q is the quantity cases of wine per month (in thousands).
Part A) Construct a graph of supply and demand for this market showing all intercepts. What are the equilibrium prices and quantities? Show these on your graph.
Part B) At the market equilibrium price, what would be the total monthly revenue?
Part C) Calculate consumer surplus at the market equilibrium and indicate this surplus as an area on your diagram.
Part D) Calculate producer surplus at the market equilibrium and indicate this surplus as an area on your diagram.