Single supply and demand diagram representing one firm

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Graph out this situation using a single supply and demand diagram representing one firm. Label the initial equilibrium price and quantity (P₁, Q₁); Then demand increases, creating an excess demand. The firm can either respond by increasing price along a stationary supply curve – label this equilibrium price and quantity with (P₂, Q₂); or by increasing supply – label this equilibrium price and quantity with (P3, Q3).

In your diagram, label the producer surplus areas under both equilibriums (P₂, Q₂) and (P₃, Q₃).

My question- Does this look right? I think the graph is right but unsure about the labeling the producer surplus area under both equlibriums.

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Reference no: EM131244390

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