- The diagrams below show the supply and demand curves in the
market for widgets. In each diagram the free market equilibrium
price and quantity are and
a. In the first diagram, if the price of widgets is at its market-
clearing equilibrium level, , identify the areas on the
graph that sum to this market’s total economic surplus.
b. In the first diagram, suppose the government imposes a
price ceiling at price Identify the areas on the graph
that represent the reduction in economic surplus as a
result of this price control.
p∗ Q∗.
p∗
p 1.
