Emily owns and operates a nail ink salon - Edexcel - A-Level Economics A - Question 4 - 2018 - Paper 1

To determine the change in total supernormal profit, we first find the total profit at profit maximisation and revenue maximisation positions.

1. Profit Maximisation Position:

   • From the graph, the quantity at profit maximisation is 25 treatments per day.

   • Total Revenue (TR) at this output level:

     $TR = Price \times Quantity = 17 \times 25 = 425 \text{ pounds}$

   • Total Cost (TC):

     $TC = 8 \times 25 = 200 \text{ pounds}$

   • Total Profit (TP):

     $TP = TR - TC = 425 - 200 = 225 \text{ pounds}$

2. Revenue Maximisation Position:

   • The quantity at revenue maximisation is 36 treatments per day. Price at this output level: £12.

   • Total Revenue (TR) at this output level:

     $TR = 12 \times 36 = 432 \text{ pounds}$

   • Total Cost (TC):

     $TC = 9 \times 36 = 324 \text{ pounds}$

   • Total Profit (TP):

     $TP = TR - TC = 432 - 324 = 108 \text{ pounds}$

3. Change in Total Supernormal Profit:

   • The change in total supernormal profit is:

     $Change = TP \text{ (revenues)} - TP \text{ (profits)} = 108 - 225 = -117 \text{ pounds}$

Thus, the change in total supernormal profit is -117 pounds.