Question

The demand and supply functions for a certain product are given by p=150-0.5q and p=0.002q2+1.5, where...

The demand and supply functions for a certain product are given by p=150-0.5q and p=0.002q2+1.5, where p is in dollars and q is the number of items.

(a) Which is the demand function?

(b) Find the equilibrium price and quantity

(c) Find the total gains from trade at the equilibrium price.

with its demand and supply functions, suppose the price is set artificially at $70 (which is above the equilibrium price).
(d) Find the quantity supplied and the quantity demanded at this price.

(e) Compute the consumer surplus at this price, using the quantity demanded.

(f) Compute the producer surplus at this price, using the quantity demanded (why?).

(g) Find the total gains from trade at this price.

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