Question

Using Supply and Demand to Analyze Markets — End of Chapter Problem

The Reinheitsgebot is a set of laws established in the 1500s that regulate the production and sale of beer in Germany. Among its provisions, the edict set maximum prices that brewers could charge at various times of the year: "From Michaelmas to Georgi, the price for one [Bavarian Liter] is not to exceed one Pfennig Munich value." Cheap beer — this must be a great thing for consumers. Suppose that the demand for beer is given by ??=6,000−1,500? and the supply of beer is given by ?? = −1,000+2,000?

a. Accurately graph the demand, supply, and price ceiling curves.

b. Without the price ceiling of 1‑Pfennig.

What is the equilibrium price of beer? ____ Pfennings

What is the equilibrium quantity of beer?_____consumers

What is producer surplus? ______Pfennings

What is consumer surplus? _______Pfennings

c. With the price ceiling of 1‑Pfennig.

What is the producer surplus received by beer producers after the price ceiling is imposed? ______Pfennings

What is the consumer surplus received by beer drinkers after the price ceiling is imposed? ______ Pfennings

d. After the price ceiling is imposed, beer drinkers see their surplus

Answer 1