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1. The market demand for economics books is: QD = 100P –0.5/0.5 where Q is quantity, P is price, and I is the average consumer's income. The market supply of economics books is: Os = 400P0.5w-10 where w is the hourly wage of the economists who write the books. Hint: X05 = X; x -' =/xx-05 = / As you did on Problem Set 3, assume I = 100 and w= 10, but then the wage falls to 8. On that problem set, you found that the market price (P) falls from 25 to 20. a. Imagine that the American Economics Association (AEA) – blatantly ignoring its own ingrained philosophy of efficient markets – conspires with the publishing industry to impose a price floor of $25. Using your graph, explain how you would show how each of these groups fare, relative to the new perfectly competitive equilibrium, as a result of this price floor. i. Consumers of economics textbooks. ii. Producers of economics textbooks. iii. Society as a whole.

1. The market demand for economics books is: QD = 100P –0.5/0.5 where Q is quantity, P is price, and I is the average consumer's income. The market supply of economics books is: Os = 400P0.5w-10 where w is the hourly wage of the economists who write the books. Hint: X05 = X; x -' =/xx-05 = / As you did on Problem Set 3, assume I = 100 and w= 10, but then the wage falls to 8. On that problem set, you found that the market price (P) falls from 25 to 20. a. Imagine that the American Economics Association (AEA) – blatantly ignoring its own ingrained philosophy of efficient markets – conspires with the publishing industry to impose a price floor of $25. Using your graph, explain how you would show how each of these groups fare, relative to the new perfectly competitive equilibrium, as a result of this price floor. i. Consumers of economics textbooks. ii. Producers of economics textbooks. iii. Society as a whole.

Advanced Engineering Mathematics
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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1. The market demand for economics books is: Qp = 100P –0.5p0.5 where Q is quantity, P is price, and I is the average consumer's income. The market supply of economics books is: Os = 400P0.5w -10 where w is the hourly wage of the economists who write the books. Hint: X0.5 = X; x- ='½xix-os = As you did on Problem Set 3, assume I = 100 and w = 10, but then the wage falls to 8. On that problem set, you found that the market price (P) falls from 25 to 20. a. Imagine that the American Economics Association (AEA) – blatantly ignoring its own ingrained philosophy of efficient markets – conspires with the publishing industry to impose a price floor of $25. Using your graph, explain how you would show how each of these groups fare, relative to the new perfectly competitive equilibrium, as a result of this price floor: i. Consumers of economics textbooks. ii. Producers of economics textbooks. iii. Society as a whole. b. What would have happened if the AEA had instead imposed a price ceiling at $25? How much deadweight loss would this have produced?
Transcribed Image Text:1. The market demand for economics books is: Qp = 100P –0.5p0.5 where Q is quantity, P is price, and I is the average consumer's income. The market supply of economics books is: Os = 400P0.5w -10 where w is the hourly wage of the economists who write the books. Hint: X0.5 = X; x- ='½xix-os = As you did on Problem Set 3, assume I = 100 and w = 10, but then the wage falls to 8. On that problem set, you found that the market price (P) falls from 25 to 20. a. Imagine that the American Economics Association (AEA) – blatantly ignoring its own ingrained philosophy of efficient markets – conspires with the publishing industry to impose a price floor of $25. Using your graph, explain how you would show how each of these groups fare, relative to the new perfectly competitive equilibrium, as a result of this price floor: i. Consumers of economics textbooks. ii. Producers of economics textbooks. iii. Society as a whole. b. What would have happened if the AEA had instead imposed a price ceiling at $25? How much deadweight loss would this have produced?
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