The equilibrium price and equilibrium quantity for the porcelain sloth are :
EQ = 3Units; and
EP = $5
Note that equilibrium price and equilibrium quantity are the price and quantity at which supply equals demand.
What is the total revenue for business says business is at the equilibrium point?
Note that Total Revenue is given as:
Price x Quantity
Hence the Total Revenue at the equilibrium point is
5 x 3 = $15
What is the producer and consumer surplus at equilibrium?
Producer Surplus
A measure of producer welfare is producer surplus. The region above the supply curve and below the equilibrium price is how it is depicted visually.
Hence on the attached graph, the portion that represents the producer surplus is the green right-angled triangle. To find the producer surplus, all we need to do is to find the area of the green right angled triangle.
Recall that the area of a right angled triangle is given as:
1/2 * b * h
Since b = 5; and h = 3 (because the triangle starts off at (0,0)), then
Producer Surplus = 1/2 * 5 *3
PS = 7.5
The producer surplus rises as a result of the increased motivation to create more things when the price rises.
Consumer Surplus
Consumer surplus is shown by a horizontal line drawn between the y-axis and demand curve and is defined as the region below the downward-sloping demand curve and above the existing market price of the good.
In this attached graph, this would be represented as the orange right angled triangle.
To find the consumer surplus, all we need to do is to find the area of the green right angled triangle.
Recall that the area of a right angled triangle is given as:
1/2 * b * h
Since b = 3; and h = 3 (because the triangle starts off at (0,0)), then
Consumer Surplus = 1/2 * 3 *3
CS = 3
Who is benefiting more, or has a greater surplus, an equilibrium, consumers or producers?
From the results gotten above, the party with the greater surplus (and by inference, greater benefit) at equilibrium are The Suppliers. This is because the price at equilibrium is higher that what they would have been willing to accept by 7.5.
Draw a correctly labeled graph of the market for glass llama sculptures before and after the sloths decreased in price.
Please see the attached image.
Where producer surplus after the tech change described in part E above?
This is depicted in the region shaded blue.
What would happen to the equilibrium price and quantity for llama sculptures as a result of the price decrease of the porcelain sloths?
As depicted in the graph it is clear that the equilibrium quantities for llama sculptures decreased and also shifted to a new equilibrium point because both products are substitutes.
What happens when the market for glass llama sculptures before and after the glass decreased in price?
See graph three below.
I the price decrease for glass happened at the same time as the price decrease for porcelain sloths, How would the equilibrium price and quantity for the glass llamas change?
This would lead to a new equilibrium point that was lower than the old one. See graph three.
Learn more about points of equilibrium at;
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