Wednesday
April 23, 2014

Homework Help: Economics

Posted by Mike on Friday, November 17, 2006 at 11:00am.

An early freeze in CA sours the lemon crop, What happens to consumer surplus in the market of lemons? What happens to consumer surplus in the market for lemonade? Illustrate your answers with diagrams

Draw initial supply and demand curves for lemons. Because of the freeze shift the supply curve inward. Consumer surplus is the area below demand but above price. What happens to this area? Producer surplus is the area above supply but below price. What happens to this area?

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