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. 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?
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. 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?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
A market has a
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
(iii) the producer surplus
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