Price and Quality Constraints

purple - loss of consumer surplus

green- transfer of surplus from producers to consumers

yellow - loss of producer surplus

red - deadweight loss

Consumer Surplus:

$10 X 30 = +300

-10 × 10 /2 = -50

300 - 50 = 250

Producer Surplus

300 + 50 = 350 (-350) decrease (include sign if the question doesn’t disclose increase or decrease)

The value of the the deadweight loss associated with this price ceiling? $100 (both triangles)

(0-40) * (40 - 30) /2 = $100

deadweight loss: $36

quota rent $48 (grey)