To compute the consumer and producer surplus, we need to understand the supply and demand curves shown in the graph. The graph depicts the equilibrium price and quantity where the demand (D) and marginal cost (MC) curves intersect.

Consumer Surplus (CS)

Consumer surplus is the area between the demand curve and the price level, above the equilibrium price and below the demand curve. It can be calculated as the area of a triangle: $\text{Consumer Surplus} = \frac{1}{2} \times \text{Base} \times \text{Height}$

• Base: The equilibrium quantity (45 units as shown on the graph).
• Height: The difference between the maximum price consumers are willing to pay (where the demand curve intersects the y-axis, $P = 90$) and the equilibrium price $P = 45$.

$CS = \frac{1}{2} \times 45 \times (90 - 45) = \frac{1}{2} \times 45 \times 45 = \frac{1}{2} \times 2025 = 1012.50$

Producer Surplus (PS)

Producer surplus is the area below the price level and above the supply curve (MC), below the equilibrium price. It is also calculated as the area of a triangle: $\text{Producer Surplus} = \frac{1}{2} \times \text{Base} \times \text{Height}$

• Base: Again, the equilibrium quantity (45 units).
• Height: The equilibrium price $P = 45$ minus the minimum price producers are willing to accept (where the MC curve intersects the y-axis, $P = 0$).

$PS = \frac{1}{2} \times 45 \times (45 - 0) = \frac{1}{2} \times 45 \times 45 = \frac{1}{2} \times 2025 = 1012.50$

Final Answer:

• Consumer Surplus: $1012.50
• Producer Surplus: $1012.50

Let me know if you'd like more details or have any questions.

Related Questions:

1. What happens to consumer surplus if the equilibrium price increases?
2. How would producer surplus change if the marginal cost increases?
3. Can a market have consumer surplus but no producer surplus?
4. What does the area under the marginal cost curve represent in economics?
5. How would a price ceiling below the equilibrium affect consumer and producer surpluses?

Tip:

Always remember that consumer surplus increases when prices drop below the maximum price consumers are willing to pay, while producer surplus grows when prices rise above the minimum cost of production.