jnu quest

[SoniaKapoor]

pls explain the answer

[Dreyfus]

The new supply curve after gov intervention is Q=P

[SoniaKapoor]

i didnt get how you got 14 and 2.And how is consumer surplus area of rect?
how did you find quantity after ss is destroyed?

[Dreyfus]

Consumer surplus is area above price under demand curve....initial eq was at P*=4 Q*=8
So the consumer surplus initially was above P=6 under DD curve.
When gov intervene...,..the new market supply becomesQs=P
New equilibrium is at P*=6 Q*=6
Now...the consumers are getting less qty( previously they were getting 8 and now they r getting 6)
So this is the loss in consumer surplus due to change in qty given by area of ∆BCE
Now at new equilibrium they are paying higher price for each unit( previously they were paying 4 and now 6)
So there is also loss in CS due to increase in price given by area of rectangle ABCD
the total area is the net change in CS