If under pure competition demand and supply functions are given by p=10−x and p=21(x−2) respectively, where p is price per unit and x is quantity, then the consumer surplus is:
Solution
✅ Correct Option: 3
To find the Consumer Surplus (CS), we first need to determine the equilibrium point (x0,p0) where the demand and supply curves intersect.
Set the demand function equal to the supply function:
10−x=21(x−2)
Square both sides to solve for x:
10−x=41(x−2)2
40−4x=x2−4x+4
x2=36⇒x0=6
(We take the positive root as quantity cannot be negative).
Now, find the equilibrium price p0 by substituting x0 into the supply equation: