Answered: domestic supply and demand of rice is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

domestic supply and demand of rice is given by the following equations:
QD=200–10p
QS=20p–100
The world price of rice is pW=8 and is unaffected by the domestic market.
(a) Suppose there are no trade barriers for importing or exporting rice. Find the resulting price,
quantity purchased by consumers, quantity produced domestically, and the quantity of imports
or exports.
(b) What is the resulting consumer and producer surplus (domestic)?
(c) If all international trade of rice is banned (no imports or exports allowed), what is the resulting
domestic price and quantity?
(d) What is the resulting CS and PS under the ban? What is the deadweight loss?

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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