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I. Market Scenario
Due to more relaxed quarantine restrictions, the supply chain which includes the mobility
of raw materials as well as delivery of products has become stable. Adding to this is the
resumption of most businesses and jobs making income streams for most households
generally stable. Consequently, the existence of other competitors and the availability of
reusable face masks, N95 masks and plastic face shields as alternatives have stabilized
the market for disposable face masks in terms of supply and demand (mid-June 2020).
With this, PreventuTM has determined the following demand and supply curve for Vilter:
Where 𝑃 is the corresponding market price in Php for every quantity of Vilter that the
consumers are willing to buy (𝑄# ), and for every quantity that PreventuTM is able to supply
(𝑄$ ). 𝑄# and 𝑄$ are quantities in thousand boxes where every box contains 100
disposable masks.
𝑃 = 0.2𝑄$+ + 0.6𝑄$ + 95
𝑃 = 180 − 0.1𝑄#+
(thousand boxes)
The equilibrium point or market equilibrium, where the quantity of Vilter demanded equals
the quantity supplied is at 16 thousand boxes for a market price of Php 154.70
(Calculation for the equilibrium point is in the Annexes Section). Graphically (Figure 2),
the equilibrium point is the intersection between the two curves.
The consumer’s surplus, which is the benefit enjoyed or the value derived by the
consumers from purchasing a good is Php 263,510. (Calculation for the consumer’s
surplus is in the Annexes Section). Graphically (Figure 3), the consumer’s surplus is the
area below the demand curve and the above the equilibrium price.
Consumer’s
Surplus
The producer’s surplus, which is the benefit enjoyed or the value derived by Prevento
from the transactions is Php 607,000. (Calculation for the producer’s surplus is in the
Annexes Section). Graphically (Figure 4), the producer’s surplus is the area below the
equilibrium price and above the supply curve.
Producer’s
Surplus
Boehm, C., & Pandalai-Nayar, N. (2020). Convex Supply Curves. National Bureau of
Economic Research.
By definition, the equilibrium point is the where the quantity demanded equals the quantity
supplied or 𝑄# = 𝑄$ = 𝑄 which occurs at the same 𝑃. Simply, this is the intersection
between the two curves where the two equations are equal. Therefore,
By rearranging and combining similar terms in the equation, the following equation is
obtained:
0.3𝑄+ + 0.6𝑄 − 85 = 0
𝑄+ + 2𝑄 − 283.33 = 0
Find the factors of the quadratic equation using the quadratic formula:
34±√4 7 389:
𝑄= +9
3+±>+7 38(@)(3+BC.CC)
𝑄= +(@)
𝑸𝒆 = 𝟏𝟓. 𝟗 ~𝟏𝟔
𝑃E = 180 − 0.1(15.9)+
𝑷𝒆 = 𝟏𝟓𝟒.7
b. Calculation of the Consumer’s Surplus
Consumer’s
Surplus
𝑃 = 180 − 0.1𝑄#+
@a.b
𝐴 = ∫c (25.3 − 0.1𝑄#+ )𝑑𝑄#
@a.b
c.@efg
𝐴 = 25.3𝑄# − C
h
c
c.@(@a.b)g c.@(c)g
𝐴 = i25.3(15.9) − C
h − i25.3(0) − C
h
𝐴 = 263.51
𝑃 = 0.2𝑄$+ + 0.6𝑄$ + 95
∆𝑸𝒔
Producer’s
Surplus
@a.b
𝐴 = ∫c ( 59.7 − 0.6𝑄$ − 0.2𝑄$+ )𝑑𝑄$
@a.b
c.m∗en7 c.+eng
𝐴 = 59.7𝑄$ − +
− C
h
c
𝐴 = 607.00