Correctly illustrate a supply and demand curve. Pay close attention to the price controls. a) Wisconsin has a salmon market which sells salmon at $15/lb. At that price, 100,000 lbs. of salmon will be consumed in one week. Suppose the state of Wisconsin were to set a quantity control of 50,000 lbs. of salmon per week. Show: P and Q using correct labeling Changes in producer surplus and consumer surplus Deadweight loss Analysis Explain why this market is allocatively inefficient.
Correctly illustrate a
a) Wisconsin has a salmon market which sells salmon at $15/lb. At that price, 100,000 lbs. of salmon will be consumed in one week. Suppose the state of Wisconsin were to set a quantity control of 50,000 lbs. of salmon per week.
Show:
- P and Q using correct labeling
- Changes in
producer surplus andconsumer surplus Deadweight loss
Analysis
- Explain why this market is allocatively inefficient.
The equilibrium price and the equilbrium quantity of a good sold in the market are determined by the demand and supply. The equilibrium occurs when the quantity demanded is equal to the quantity supplied.
The changes in demand and supply can result in changes in equilibrium price and quantity. For example, a decrease in the demand with the supply remaining the same will result in a decrease in the equilibrium quantity and price.
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