Question

chapter 07: aplia homework
total surplus is the surplus that all the individuals in an economy - in this case, consumers and producers - earn. therefore, total surplus is the sum of consumer and producer surplus at the equilibrium price and quantity - that is, the price and quantity at which the supply and demand curves intersect. in this problem, that occurs at a price of $140 per suitcase and a quantity of 210 million suitcases.
to calculate the total surplus in the market, first find the area representing consumer surplus. it has a base of 210 million suitcases and a height of $160 - $140 = $20 per suitcase. likewise, the area representing producer surplus has a base of 210 million suitcases and a height of $140 - $40 = $100 per suitcase. using the formula for the area of a triangle ($\frac{1}{2}\times base\times height$), you can calculate the areas of consumer and producer surplus as follows:
consumer surplus = $\frac{1}{2}\times base\times height$ = $\frac{1}{2}\times210$ million suitcases $\times$ $20 per suitcase = $\frac{1}{2}\times$4,200 million = $2,100 million
producer surplus = $\frac{1}{2}\times base\times height$ = $\frac{1}{2}\times210$ million suitcases $\times$ $100 per suitcase = $\frac{1}{2}\times$21,000 million = $10,500 million
therefore, total surplus equals $2,100 million + $10,500 million = $12,600 million.

Explanation:

Step1: Calculate consumer surplus

Consumer Surplus = $\frac{1}{2}\times210\text{ million}\times(160 - 140)=\frac{1}{2}\times210\text{ million}\times20=\frac{1}{2}\times4200\text{ million}=2100\text{ million}$

Step2: Calculate producer surplus

Producer Surplus = $\frac{1}{2}\times210\text{ million}\times(140 - 40)=\frac{1}{2}\times210\text{ million}\times100=\frac{1}{2}\times21000\text{ million}=10500\text{ million}$

Step3: Calculate total surplus

Total Surplus = Consumer Surplus+Producer Surplus = $2100\text{ million}+10500\text{ million}=12600\text{ million}$

Answer:

$12600$ million