The graph below represents the market for alfalfa. The equilibrium price is $7.00 per bushel, but the market price is $9.00 per bushel
Identify the areas representing consumer surplus, producer surplus, and deadweight loss at the equilibrium price of $7.00 and at the market price of $9.00.
At the equilibrium price of $7.00:
Consumer surplus is represented by area A + B + C.
Producer surplus is represented by area D + E.
There is no deadweight loss.
At the market price of $9.00:
Consumer surplus is represented by area A.
Producer surplus is represented by area B + D.
Deadweight loss is represented by area C + E.
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Suppose there is a water shortage, and the governor proposes that the government distribute equal quantities of water to each person at no cost to the consumers
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