Question

) Use the following information for the market for bananas.

Supply and demand curves are linear

Supply is steeper than supply

Demand intersects the price axis at 36

Supply intersects the price axis at 6

The equilibrium price is 24 and the equilibrium quantity is 6

a) Draw a supply and demand model of the market for bananas. Be sure to show the equilibrium quantity and price.

b) Calculate the market’s CS, PS, and TS.

c) Assume a binding price floor is enforced in the banana market at a price of $30. At the price floor, quantity demand is 3. When price is $15 quantity supply is 3.

i) Draw a new supply and demand model showing this price floor.

ii) Calculate CS, PS, and TS with the price floor.

iii) Explain in words the concept of a deadweight loss?

iv) Calculate and interpret the deadweight loss from the price floor?

v) Was the market for bananas more efficient before or after the price floor was imposed? Explain.

Answer #1

a) Graph is provided below. Equilibrium occurs at E. Price is 24 and quantity is 6

b) CS = 0.5*(36 - 24)*6 = $36. PS = 0.5*(24 - 6)*6 = $54. TS = 0.5*(36 - 6)*6 = $90.

c) If price floor is applied, there is a surplus.

i) The model is shown below.

ii) CS = 0.5*(36 - 30)*3 = $9. PS = 0.5*(15 - 6)*3 + (30 - 15)*3 = $58.5. TS = PS + CS = $67.5

iii) Deadweight loss is the loss in the efficiency when resource allocation is ineffcient and market produces a lower level of output than the market efficient.

iv) DWL = 0.5*(30 - 15)*3 = $22.5

v) Because the market has a higher total surplus before the price floor, it is more efficient

Deadweight Loss] Suppose the market for corn in Banana Republic
is competitive. The domestic supply and demand function of corn is
Qs = 10P and Qd = 100 − 10P, respectively. Both of them measured in
billions of bushels per year.
(a) Calculate the equilibrium price and quantity,
consumer surplus (CS), and producer surplus (PS).
(b) Suppose the government offers a subsidy of $2 per
bushel to the firms. In equilibrium, the consumers are paying $4
per bushel and the...

You are given the following information about the demand for and
supply of widgets in the Republic of Xénïa. Answer the questions
that follow. If you draw diagrams, use a ruler, label the diagrams
completely, show demand choke price, demand intercept, supply choke
price, supply intercept, etc. Do not use double columns or put
rectangles or squares around your answers. Use “D” for demand and
“S” for supply. Do not use Qd or Qs to label your diagrams.
Although you...

A market has supply and demand curves that follow the following
set of equations: Supply → P = 4QS + 10 Demand → P = -5QD + 280.
For both of these problems pictures are not required but the
problems may be much easier if you draw some.
a) Find the equilibrium price and quantity in this market and
the consumer and producer surplus from the equilibrium price and
quantity. (1 point)
b) If there is a ceiling price in...

Consider the daily market for bananas in Australia:
Demand: P = 100 –
5Qd
Supply: P = 10 +
10Qs
where quantity (Q) is measured in 1000 tons (for example, Q = 2
means Q = 2K tons, where K stands for 1000) and price (P) is price
per ton, and the superscripts d and s stand for ‘demand’ and
‘supply’ respectively.
The Equilibrium Price = _____________
The Equilibrium Quantity = ___________
In the problem above, Australian government does...

Consider a perfectly competitive market in the short-run with
the following demand and supply curves, where P is in dollars per
unit and Q is units per year:
Demand: P = 500 –
0.8Q
Supply: P = 1.2Q
Calculate the short-run competitive market equilibrium price
and quantity. Graph demand, supply, and indicate the equilibrium
price and quantity on the graph.
Now suppose that the government imposes a price ceiling and
sets the price at P = 180. Address each of...

A market is described by the following supply and demand
curves:
QSQS
= =
3P3P
QDQD
= =
400−P400−P
The equilibrium price is______
and the equilibrium quantity is_______
.
Suppose the government imposes a price ceiling of $80. This
price ceiling is (binding or not binding) , and
the market price will be
. The quantity supplied will be______
, and the quantity demanded will be_____
. Therefore, a price ceiling of $80 will result in (a
shortage, neither a shortage nor...

Assume that the market for scones is in equilibrium.
Graph the market for scones, assuming unit-elastic supply and
demand. Label the equilibrium price Pe and the equilibrium quantity
Qe.
Average consumer income goes from $25,000 to $30,000 as the
quantity demanded increases from 50,000 units to 60,000 units. What
is the income elasticity for scones across this range?
Are scones a normal or inferior good? Explain using the income
elasticity coefficient.
Illustrate the effect of part (b) on your graph...

Suppose the demand and supply curves for a large specialty
pizza are given by:
Qd = 120 – 10P
Qs = -30 + 5P.
Using the demand and supply functions above, the equilibrium
price of a pizza is ____, and the equilibrium quantity is ____.
Illustrate your answer.
Compute Price elasticity of demand and supply at this
equilibrium.
Compute CS and PS and illustrate on a graph.
Suppose that the government decrees that a specialty cannot be
sold above $8....

Question 2. The market supply and demand curves for a product
are:
QS=0.5P (supply curve)
QD=60–2P (demand curve)
where Q is the quantity of the product and P is the market
price.
(1). Calculate the equilibrium price, equilibrium quantity and
total social welfare. (10 points)
(2). Suppose that the market has changed from a perfectly
competitive market to a monopoly market, calculate the new
price–output combination and the total deadweight loss in the
monopoly market. (10 points)

Let the market demand curve be QD=8-P
and the market supply curve be QS=P. Let
price P be measured in $/unit and let quantity Q
be measured in singular units (i.e. simple count).
Solve for the equilibrium price P* and
quantity Q*.
Now, assume the government imposes a $2/unit tax on consumers,
which leads to wedge/gap between the buyers’ price
Pb and the sellers’ price
PS.
Rewrite the demand and supply curves using Pb
and PS, respectively.
Write down the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 5 minutes ago

asked 9 minutes ago

asked 16 minutes ago

asked 19 minutes ago

asked 22 minutes ago

asked 22 minutes ago

asked 22 minutes ago

asked 24 minutes ago

asked 30 minutes ago

asked 30 minutes ago

asked 44 minutes ago