Question

Consider a closed economy. Let the demand curve be P = 80 - Q and the supply curve be P = 20 + 2Q

a) Calculate the equilibrium price and equilibrium quantity.

b) Suppose the government sets a price ceiling of $55, what is
the amount of excess demand or excess supply? **(Write down
excess demand or excess supply).**

c) Suppose the government sets a production quota of 16 units, calculate the equilibrium price and equilibrium quantity.

Answer #1

a. The equilibrium price and equilibrium quantity is determined where the demand curve intersects the supply curve.

Or, 80 - Q = 20 + 2Q

Or 3Q=60

Or, Q = 20 units.

At Q = 20, P can be found out by putting the value of Q in any of the supply or demand equations.

We get, P = $60.

Hence, these are the equilibrium price and equilibrium quantity.

b. The price ceiling sets the price which is lower than the equilibrium price level. As is shown in the diagram, this will lead to excess demand.

In order to calculate the value of excess demand, we need to first calculate the value of demand and supply at the price of $55.

At P = 55, Demand = 80 - 55 = 25 units.

Supply, = 55/2 - 10 = 17.5 units.

Thus, the excess demand is of 25 - 17.5 = 7.5 units.

C. Production quota implies that the supply gets fixed at 16 units and this makes the supply curve perfectly inelastic.

Now, new equilibrium will be attained where the demand curve intersects the new supply curve.

Or, 80 - P = 16

P = $64

The quilibrium quantity is fixed and it will be 16 units only.

2Q Consider a closed economy. Let the demand curve be P = 80 - Q
and the supply curve be P = 20 + 2Q .
a) Calculate the equilibrium price and equilibrium quantity. b)
Suppose the government sets a price ceiling of $55, what is the
amount of excess demand or excess supply? (Write down excess demand
or excess supply). c) Suppose the government sets a production
quota of 16 units, calculate the equilibrium price and equilibrium
quantity. 2....

Again, consider the same scenario, with inverse demand curve and
P=30-Q and supply defined by P= 4Q. Calculate the demand price,
supply price, and equilibrium quantity, whether the intervention is
effective and draw diagrams in any three cases.
Consider a quantity quota Q= 3 imposed by the government
Consider a price ceiling of P= 20 imposed by the
government
Consider a price floor of P= 30 imposed by the government

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...

Suppose that the demand equation: P = 6 – Q and supply equation:
P = Q.
a. Calculate the price elasticity of demand at
equilibrium.
b. Calculate the equilibrium price and quantity, and consumer
surplus and producer surplus.
c. Suppose government imposes a unit tax of $1 on producers. Derive
the new supply curve and also calculate the new equilibrium price
and quantity.
d. Calculate tax revenue and the deadweight loss of this tax.

1. The demand curve for wheat is given by Q = 1200 - 100P, and
the supply curve for wheat is given by Q = 200P - 300; Q is
measured in bushels of wheat, and P is the price per bushel.
a. Carefully graph this demand curve and supply curve in the
same diagram.
b. Algebraically solve for the numerical value of the
equilibrium price and quantity. Show in your diagram.
c. Assume that the government sets a “price...

Suppose that the demand curve for wheat is Q=100−10p and the
supply curve is Q=10p. The government imposes a price ceiling of
p=3
i) Describe how the equilibrium changes. ii) What effect does
this price ceiling have on consumer surplus, producer surplus, and
deadweight loss?

Suppose that the inverse demand for webcams is given by P = 150
– Q and the inverse supply for webcams is given by P = 30 + 2Q.
If the market for webcams faces a quota of 30 units, then what
are the equilibrium price and quantity?
If the market for webcams faces a quota of 30 units and a tax
of $60 per webcam, then what are the equilibrium price and
quantity?
In dollars, what is the tax...

Assume a market where the demand curve is p = 10 - q and the
supply curve is P = Q. The government sets a price floor where the
price is 3. How does price regulation affect the quantity sold

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...

Suppose that the inverse demand for webcams is given by P = 150
– Q and the inverse supply for webcams is given by P = 30 + 2Q.
(20 points) If the market for webcams faces a quota of 30
units, then what are the equilibrium price and quantity?
(20 points) If the market for webcams faces a quota of 30 units
and a tax of $60 per webcam, then what are the equilibrium price
and quantity?
(10 points)...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 58 minutes ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 4 hours ago

asked 5 hours ago

asked 5 hours ago

asked 5 hours ago

asked 5 hours ago

asked 5 hours ago

asked 5 hours ago

asked 5 hours ago