Question

The demand and supply for a good are respectively QD = 16 – 2P + 2I...

The demand and supply for a good are respectively QD = 16 – 2P + 2I and QS = 2P – 4 with QD denoting the quantity demanded, QS the quantity supplied, and P the price for the good. Suppose the consumers’ income is I = 2. 6) Determine the price-elasticity of demand if P = 2. 7) Determine the income-elasticity of demand if P = 2. 8) Determine the price-elasticity of supply if P = 4. 9) Determine consumers’ expenditures at the equilibrium. 10) Determine the consumer surplus at the equilibrium. 11) Determine consumers’ total benefits at the equilibrium. 12) Determine producers’ total revenues at the equilibrium. 13) Determine producers’ total cost (there are no fixed costs) at the equilibrium. 14) Determine the producer surplus at the equilibrium. 15) Determine the total surplus at the equilibrium.

Homework Answers

Answer #1

6. Qd when price=2 and income=2

Qd=16-2*2+2*2=16

Price elasticity of demand=dQd/dP*P/Q=(-)2*2/16=(-).25

7. Income elasticity of demand=dQd/dI*I/Q=2*2/16=.25

8.Qs=2*4-4=4

price elasticity of supply=dQs/dP*P/Q=2*4/4=2

9. At equilibrium Qd=Qs

16-2*P+2*2=2*P-4

P=6 (equilibrium price)

Qd=Qs=8(equilibrium quantity)

Consumer expenditure=P*Q=6*8=48

10. When Qd=0 Price=10

Consumer Surplus=1/2*(10-6)*8=16

11.Total Consumer benefit= Area under the demand curve=Consumer surplus+Consumer expenditure=16+48=64

12.Producers revenue=Consumers expenditure=48

13.Producers total cost=Area under the supply curve=1/2*8*6=24

14.Producer Surplus=1/2*8*6=24

15.Total surplus=Consumer Surplus + producer Surplus=16+24=40

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Questions 16 to 22 The demand and supply for good x are respectively QD = 28...
Questions 16 to 22 The demand and supply for good x are respectively QD = 28 – Px + Py/2 and QS = Px – 10 with QD denoting the quantity demanded for good x, QS the quantity supplied for good x, Px the price for good x, and Py the price for good y a substitute to good x. Suppose Py = 4. 16) Determine the cross-price elasticity of demand at the equilibrium. Suppose the government imposes a unit...
1) The demand and supply for a good are respectively QD = 10 – P and...
1) The demand and supply for a good are respectively QD = 10 – P and QS = 4 + P. a) Determine the equilibrium price. b) Determine the equilibrium quantity. c) Determine consumers’ expenditures on the good. d) Determine total consumers benefits (understanding that the inverse demand represents the marginal benefit curve). e) Determine the consumer surplus. f) Determine producers’ total revenues. g) Determine the producer surplus. h) Determine the total surplus.
A market is described by the following supply and demand curves: QS = 2P QD =...
A market is described by the following supply and demand curves: QS = 2P QD = 400 - 3P Solve for the equilibrium price and quantity. If the government imposes a price ceiling of $70, does a shortage or surplus (or neither) develop? What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus? If the government imposes a price floor of $70, does a shortage or surplus (or neither) develop? What are the price, quantity...
1. Consider a demand curve of the form QD = 40 - 2P, where QD is...
1. Consider a demand curve of the form QD = 40 - 2P, where QD is the quantity demanded and P is the price of the good. The supply curve takes the form of QS = -4 + 2P, where QS is the quantity supplied, and P is the price of the good. Be sure to put P on the vertical axis and Q on the horizontal axis. a. What is the equilibrium price and quantity? Draw out the supply...
The demand and supply curves for a good are given by QD = 50 – 2P...
The demand and supply curves for a good are given by QD = 50 – 2P and QS = P – 1. Calculate the price elasticity of demand at the equilibrium price. Calculate the price elasticity of supply at the equilibrium price. What would happen to consumer expenditures on the good if firms must pay higher prices for their inputs in production?
The demand and supply for a good are respectively P = 20 – QD and P...
The demand and supply for a good are respectively P = 20 – QD and P = - 4 + 2QS. 17) Determine the equilibrium quantity in the absence of any intervention by the government. 18) Determine the equilibrium price in the absence of any intervention by the government. Suppose the government imposes a quota equal to Q = 6. 19) Determine the maximum price consumers are willing to pay to buy the good when Q = 6. 20) Determine...
Suppose demand and supply are given by Qd = 60 - P and Qs  = 1.0P -...
Suppose demand and supply are given by Qd = 60 - P and Qs  = 1.0P - 20. a. What are the equilibrium quantity and price in this market? Equilibrium quantity:   Equilibrium price: $   b. Determine the quantity demanded, the quantity supplied, and the magnitude of the surplus if a price floor of $52 is imposed in this market. Quantity demanded:   Quantity supplied:   Surplus:   c. Determine the quantity demanded, the quantity supplied, and the magnitude of the shortage if a price...
Assume that the demand function for a particular good is Qd=90-2P and the supply function is...
Assume that the demand function for a particular good is Qd=90-2P and the supply function is Qs= -10+2P. Assume that the market for the particular good was initially the equilibrium (with no taxes, no regulation, etc.). Assume that a tax of $1 is imposed on the sellers of the good. How will the incidence of the tax be distributed between the sellers (producers) and the buyers (consumers) of the good?
Domestic demand for a good is QD = 3000 - 25P. The domestic supply of the...
Domestic demand for a good is QD = 3000 - 25P. The domestic supply of the good is QS = 20P. Foreign producers can supply any quantity at a price (P) of $30. Is there a shortage or a surplus? What is the quantity of shortage or surplus?
Suppose the market demand curve for a product is given by QD=100-5P and the market supply...
Suppose the market demand curve for a product is given by QD=100-5P and the market supply curve is given by QS=5P a. What are the equilibrium price and quantity? b. At the market equilibrium, what is the price elasticity of demand? Suppose government sets the price at $15 to benefit the producers. What is the quantity demanded? What is the quantity supplied? What is the amount of the surplus? Suppose market demand increases to Qd=200-5P. What is the new equilibrium...