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. 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 decide between two options: Maintain the number of quotas and let the market adjust or maintain the price support and increase in number of quotas. Suppose now the government decided to increase the number of quotas available to 72units, but it keeps the price support at the current level of $72. Calculate i) the consumer surplus ii) the producer surplus iii) 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 a 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 decide between two options: Maintain the number of quotas and let the market adjust or maintain the price support and increase in number of quotas. Suppose now the government decided to increase the number of quotas available to 72units, but it keeps the price support at the current level of $72. Calculate i) the consumer surplus ii) the producer surplus iii) deadweight loss
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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. 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 decide between two options:
Maintain the number of quotas and let the market adjust or maintain the price support and increase in number of quotas. Suppose now the government decided to increase the number of quotas available to 72units, but it keeps the price support at the current level of $72.
Calculate
i) the consumer surplus
ii) the producer surplus
iii) deadweight loss
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