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 price support per unit and production quotas. (a) if the price is set at $72 per unit, what production quota is needed to make sure there are no shortages or surpluses? Considering the price support and the quota, calculate (I)the consumer surplus (iI)the producer surplus (iii) the deadweight loss
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 price support per unit and production quotas.
(a) if the price is set at $72 per unit, what production quota is needed to make sure there are no shortages or surpluses?
Considering the price support and the quota, calculate
(I)the
(iI)the
(iii) the
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 device between these two options
maintain the number of quotas and let the market adjust
or
maintain the price support and increase the number of quotas?
Suppose that the government decides to maintain the number of quotas and let the market adjust. Calculate
(I) price observed in the market
(ii)the consumer surplus
(iii) the producer surplus
(iv) the deadweight loss
Suppose now that the government decides to increase the number of quotas available to 72 units but it keeps the price support at the current level of $72. Calculate
(I)the
(ii) producer surplus
(iii) deadweight loss
(e) which of the two options would be preferred by the producers?
(f) which of the two options will be preferred by society on the whole?
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