(c) Due to good weather, there is an increase in 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. Suppose that the government decided 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) deadweight loss (d) 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 consumer surplus
Please answer questions C (iii), C (iv) and d. Thank you.
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
(a) If the price is set at $72 per unit, what production quota is needed to make sure there are no shortgages or surpluses?
(b) Considering th eprice support and the quota, calculate:
- the
consumer surplus - the producer surplus
deadweight loss
(c) Due to good weather, there is an increase in 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.
Suppose that the government decided 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) deadweight loss
(d) 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 consumer surplus
(ii) the producer surplus
(iii) deadweight loss
(e) Which of the two options would be preferred by the producers?
(f) Which of the two options would be preferred by society as a whole?
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