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AP Economics Mr. Davey Sample FRQ Producer and Consumer Surplus 1. Assume the market for flu vaccines is perfectly competitive and currently at equilibrium. a. Using a correctly labeled supply and demand graph show each of the following: i. The equilibrium price and quantity. ii. The area representing consumer surplus, labeled CS. iii. The area representing producer surplus, labeled PS. b. Suppose the government imposes an effective (binding) price floor in the flu vaccine market. i. Redraw your graph accounting for the floor. ii. Shade the area representing the sum of consumer surplus and producer surplus. iii. Describe the current condition of the flu vaccine market. c. Suppose the price of medical needles increase (price floor still effective). Draw the corresponding graph accounting for the new conditions. i. Indicate what will happen to the area of consumer surplus and producer surplus.
