Worked-example setupScope and assumptions
- The Linden inverse demand and supply lines represent included willingness to pay and seller reservation amounts over the displayed domain.
- The equilibrium quantity of 800 chairs is traded without taxes, external effects, market power, information problems, transaction costs, or allocation failures.
- The welfare areas are model outputs, not observed valuations or accounting records.
- Period
- One representative fictional week
- Units
- USD of modeled surplus per representative week
- Rounding
- Exact whole US dollars
Recover the inverse-price intercepts
Baseline demand reaches zero quantity at $140. The linear supply function has an inverse-price intercept of negative $20; that is a model extension used for the area, not evidence that sellers literally pay buyers outside the relevant domain.
At the $60 equilibrium and 800 traded chairs:
- consumer surplus is
1/2 × ($140 - $60) × 800 = $32,000; - producer surplus is
1/2 × ($60 - (-$20)) × 800 = $32,000; and - total surplus is
$32,000 + $32,000 = $64,000per modeled week.
Both components use the same market, period, price, quantity, and curve basis.
Keep three interpretations apart
Consumer surplus is not an asset on the seller's books. Producer surplus is not net income: the area can omit fixed costs, depreciation, taxes, financing, and recognition rules. Neither area proves cash collection. Total surplus is the scoped buyer-plus-seller sum, not complete social welfare.
Before broadening the conclusion, ask whose willingness to pay appears in demand, whose costs appear in supply, who is excluded by ability to pay, and whether quality, rights, external effects, information, risk, or distribution matter.
Verified calculation · economics foundations analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- linear markets
- 1 field
Inspect data
{
"linden_welfare": {
"demand_intercept_quantity": 1400,
"demand_quantity_per_price": 10,
"price_checks": {
"equilibrium_price": 60
},
"supply_intercept_quantity": 200,
"supply_quantity_per_price": 10
}
}Recomputed result
| Measure | Value |
|---|---|
| equilibrium consumer surplus | 32,000 |
| equilibrium price | 60 |
| equilibrium producer surplus | 32,000 |
| equilibrium quantity | 800 |
| equilibrium total surplus | 64,000 |
| inverse demand price intercept | 140 |
| inverse supply price intercept | -20 |