Question

Demand for Dok P=60-0.5Q

supply P=12+0,5Q

1.what is the equilibrium price, quantity, consumer surplus and producer surplus.

2.suppose the demand curve increases by 12 unit at given price. Hold everything constant, what is new equilibrium price, quantity, consumer surplus and producer surplus.

3.use the original demand and supply curve in part one. assume economy can trade with world for 12 unit. What is the market price for local consumers if the world price is 24. What is price local producer can charge.

4.Assume the economy can trade with the world but instead of quota the government decide to charge a tariff of 4. What is the dead wright loss

Answer 1

1.At equilibrium demand =supply , 60-0.5Q=12+0.5Q . SO, [Q=48]and [P=36] .

Now CS = .5*24*48=576 and PS is .5*36*48 =864.

2.New Equilibrium is 72-.5Q=12+.5Q So, [P=30] and[Q=60] . And CS =.5*42*60=1260 and PS =.5*30*60 =900.

3. Market Price for local consumer and producer is 30 after assuming 12 unit will use for world trade. And any price in world is not affect the market price.

4.So, the price in world is increase by 4. And deadweight loss is social loss neither producer nor consumer will be benefitted.