Due to good weather, there is an increase in the demand for the food. The new demand equation is Qd=190-2p. The government is trying to decide between two options: -maintain quota - maintain the price
Due to good weather, there is an increase in the
-maintain quota
- maintain the
suppose that the government decides to maintain the number quotas and let the market adjust.
calculate:
i. Price observed in market
ii.
iii. The
Suppose now that the government decides to increase the number of quotas available to 72 units, but it keeps the price at the current level of $72. Calculate
i. The consumer surplus
ii. The producer surplus
iii. Dead weight loss
and
which of the two options would be preferred by the producers?
which of the two options would be preferred by society as a whole?
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