Question

The demand for a product is given by p = d ( q ) = − 0.8 q + 150
and the supply for the same product is given by p = s ( q ) = 5.2
q. For both functions, *q* is the quantity and *p* is
the price in dollars. Suppose the price is set artificially at $70
(which is below the equilibrium price).

a) Find the quantity supplied and the quantity demanded at this
price.

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

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

d) Find the total gains from trade at this price.

e) What do you observe?

Answer #1

Suppose the demand and supply for a product is given by the
following equations:
p=d(q)=−0.8q+150
(Demand)
p=s(q)=5.2q
(Supply)
For both functions, q is the quantity and p is the price.
Find the equilibrium point. (Equilibrium price and equilibrium
quantity) (1.5 Marks)
Compute the consumer surplus. (1.5 Marks)
Compute the producer surplus. (1.5 Marks)

Assume that the demand
curve D(p) given below is the market demand for apples:
Q=D(p)=320−12pQ=D(p)=320-12p, p
> 0
Let the market supply
of apples be given by:
Q=S(p)=60+15pQ=S(p)=60+15p,
p > 0
where p is the price
(in dollars) and Q is the quantity. The functions D(p) and S(p)
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Round the equilibrium
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a) Which is the demand function? Why do you know?
b) Find the equilibrium price and quantity.
c) Find the total gains from trade at the equilibrium price.

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a) Graph the functions and find the equilibrium price and
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where P = price per bulk bag (in dollars) and Qs =
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In what form are these functions in? (2pts)
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(5pts)
Draw out a simple graph with these curves. Label the
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(5pts)
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(i) Would this market be considered efficient?
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P(Q) = 3000 - 6Q
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