Calculate:a. The price obersved in the marketb. The consumer surplusc. The producer surplusd. The deadweight lossNB: SHOW ALL WORKINGS AND GRAPH A market has a demand function given by the equation Qd = 180-2P, and a supply function is given by the equation Qs = -15 + P. Themarket is government-regulated, with price support per unit and production quotas. (NOTE: A production quota restricts the quantity of the goodthat can be produced. Firms are not allowed to produce more than the quota)(a) If the price is $72 per unit, what production quota is needed to ensure no shortages or surpluses? (HINT: Sketch the supply and demandequations.) 36(b) Considering the price support and the quota, calculate(1) the consumer surplus, 324(ii) the producer surplus, 1404(iii) deadweight loss, 147Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190-2P. The government is tryingto decide between two options:• Maintain the number of quotas and let the market adjust, or• Maintain price support and increase the number of quotas.Suppose the government decides to maintain the number of quotas and adjust the market.(HINT: Sketch the supply and demand equations.)

Answered: A market has a demand function given by…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Calculate:

a. The price obersved in the market

b. The consumer surplus

c. The producer surplus

d. The deadweight loss

NB: SHOW ALL WORKINGS AND GRAPH

A market has a demand function given by the equation Qd = 180-2P, and a supply function is given by the equation Qs = -15 + P. The
market is government-regulated, with price support per unit and production quotas. (NOTE: A production quota restricts the quantity of the good
that can be produced. Firms are not allowed to produce more than the quota)
(a) If the price is $72 per unit, what production quota is needed to ensure no shortages or surpluses? (HINT: Sketch the supply and demand
equations.) 36
(b) Considering the price support and the quota, calculate
(1) the consumer surplus, 324
(ii) the producer surplus, 1404
(iii) deadweight loss, 147
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 price support and increase the number of quotas.
Suppose the government decides to maintain the number of quotas and adjust the market.
(HINT: Sketch the supply and demand equations.)

Expert Solution

Step 1: Define key term

The equilibrium price and the quantity of a good sold in the market are determined by the forces of demand and supply. Equilibrium occurs at the point where the quantity demanded is equal to the quantity supplied.

Price support system is used by governments to protect the producers. By implementing price support, the government ensures that a minimum price is received for the product in the market.

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