A market has a demand function given by the equation Qd = 180-2p, and a supply function given by the equation Qs =-15+p. The market is government-regulated with a price support per unit and production quotas.(NOTE: a production quota is a restriction on the quantity of the good that can be produced. Firms are not allowed to produce more than the quota) a). if the price is set at $72 per unit, what production quota is needed to make sure there are no shortages or surpluses? Due to good weather, there is an increase in the demand for the good. the new demand equation is qd=190-2p. The government is trying to decide between two options: * Maintain the number of quotas and let the market adjust, or * Maintain the price support and increase the number of quotas (i). Which of the two options would be preferred by the producers? (ii) Which of the two options would be preferred by society on a whole?
A market has a
a). if the price is set at $72 per unit, what production quota is needed to make sure there are no shortages or surpluses?
Due to good weather, there is an increase in the demand for the good. the new demand equation is qd=190-2p. The government is trying to decide between two options:
* Maintain the number of quotas and let the market adjust, or
* Maintain the price support and increase the number of quotas
(i). Which of the two options would be preferred by the producers?
(ii) Which of the two options would be preferred by society on a whole?
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