Question

Suppose the market for potatoes can be expressed as follows:

Demand: QD = 400 – 16P

Supply: QS = –40 + 4P

a) Calculate the equilibrium price and equilibrium quantity.

b) Suppose the government sets a price ceiling of $14 per unit, what quantity demanded and quantity supplied would be realized?

c) Neatly sketch a diagram to represent *parts a* and
*b* on a single graph.

- Make sure to illustrate the equilibrium price and quantity, the price ceiling, and the actual quantity that would be sold.

- Identify on the graph the region that would represent the deadweight loss the results from the imposition of the price ceiling.

d) Calculate the deadweight loss that results from the imposition of the price ceiling.

e) If the government sets a price ceiling of $30, what would be the deadweight loss? Use three sentences or less to explain you answer.

Please answer all parts by showing the steps.

Answer #1

1) Suppose the market for potatoes can be expressed as follows:
Supply: s = -20 + 10p Demand: d = 400 - 20p a) Solve for the
equilibrium price and quantity. b) Solve for the equilibrium when
the demand increases to d = 430 - 20p.

Suppose the market for grass seed can be expressed as: Demand:
QD = 200 - 5p
Supply: QS = 40 + 5p
3.1 Calculate the price and quantity in equilibrium
3.2 If the government collects a $5 specific tax from sellers,
how much will the quantity
demanded change from the amount demanded before the tax? What
price will consumers pay after the tax? What price will sellers
receive after the tax? What is the tax revenue?
3.3 Draw the graph...

Assume that the market for Good X is defined as follows: QD = 64
- 16P and QS = 16P - 8. If the government imposes a price ceiling
at $1.00 in this market, what is the loss associated with this
policy?
$64
$48
$25
$9
There is no loss because the restriction will have no
effect.

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...

Consider the following market for
board games: (Do NOT round values)
Qs= -20+4P Qd= 300-P
a) Calculate initial equilibrium
supply and demand.
b) Calculate consumer and producer
surplus. Show graphically.
c) Since board games make the world
a better place, the government puts a $30 subsidy on all board
games. Recalculate new equilibrium prices and quantity.
d) Show (c) in a graph and calculate
consumer surplus, producer surplus, government cost and deadweight
loss. Show these in the graph.

Consider the following market for
board games: (Do NOT round values)
Qs= -20+4P Qd= 300-P
a) Calculate initial equilibrium
supply and demand.
b) Calculate consumer and producer
surplus. Show graphically.
c) Since board games make the world
a better place, the government puts a $30 subsidy on all board
games. Recalculate new equilibrium prices and quantity.
d) Show (c) in a graph and calculate
consumer surplus, producer surplus, government cost and deadweight
loss. Show these in the graph.

Quantitative Problem
Suppose the demand function for a new smartphone can be
expressed as QD = 1000 – 1.5P with QD being quantity demanded and P
being price. The supply function can be expressed as QS = 50 +
2P
Fill out the following table using the above equations:
Price Quantity Quantity Surplus
Demanded Supplied Amount
or Shortage
Amount
200
220
240
260
280
300
320
340
Now answer the following questions:
What is the equilibrium price? You can...

2. The demand and supply functions for rental accommodation in
Metroland are as follows: Qd = 120 - P Qs = 2P a. Solve for the
competitive equilibrium rental rate (P) and quantity (Q) of rental
units in Metroland. Illustrate this equilibrium in a graph. b. On
your graph, show the regions that represent consumer surplus and
producer surplus. Calculate the value of consumer surplus, producer
surplus, and overall welfare. c. Suppose the City of Metroland
enacts a rent control...

2. The demand and supply functions for rental accommodation in
Metroland are as follows:
Qd =120-P
Qs = 2P
a. Solve for the competitive equilibrium rental rate
(P) and quantity (Q) of rental units in
Metroland. Illustrate this equilibrium in a graph.
On your graph, show the regions that represent consumer surplus
and producer surplus. Calculate the value of consumer surplus,
producer surplus, and overall welfare.
b. Suppose the City of Metroland enacts a rent control ordinance
that imposes a...

Consider a closed economy. Suppose the market for corn in banana
republic is competitive. The domestic market demand function for
corn is Qd=18 -P and the domestic market supply function is Qs=P-2,
both measured in billions of bushels per year. In order to help the
corn industry, the government initiated a price support program by
purchasing 2 billion bushels corn in the market.
a) draw a graph to show the new market equilibrium
price and quantity without calculating the number....

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