Question

The accompanying table shows the demand and supply schedules for concert tickets at Oracle Arena: Quantities are in THOUSANDS Ticket Price Q d Q s $150.00 20 24 $135.00 22 22 $120.00 24 20 $105.00 26 18 $90.00 28 16 $75.00 30 14 a. Find the equilibrium price and quantity. b. Suppose that the Oakland mayor sets a price ceiling of $105. How large is the shortage of concert? Show on the supply and demand diagrams, and also calculate the amount of ticket shortage. Who loses and who benefits from this policy? c. Suppose that the stock market crashes, demand for concert tickets plummet as a result. 6M less taxi rides are demanded per year (shifting the Qd curve). What effect will the mayor's new policy have now? d. Suppose that the stock market skyrockets, as does the demand. Now the mayor wants to ingratiate himself with the Oracle Arena and sets a $150 price floor. Illustrate the effects of this policy on the market, and determine the new price and quantity. What is the deadweight loss?

Answer 1