Please refer to the background information below to answer the following three questions. There are two groups of consumers, A and B, for herbal medicine with the following demand relations respectively: Group A: P 430 -0.6Q Group B: P=570 -0.1Q The market supply of herbal medicine is P=215+0.6Q where P is price per unit of herbal medicine (in dollars), and Q is quantity of herbal medicine. 8. Suppose the market is free of government intervention. We can compute that the market equilibrium price is [Answer08A = 519.29] dollars per unit, and the market equilibrium quantity is [ Answer08B507.14] units. 9. Suppose the central planner forces the economy to produce and exchange herbal medicine with the quantity of 953 units. We will expect a minimum welfare loss of [Answer0969576.01] dollars when compared to the market without intervention. 10. Suppose the central planner wants to achieve the same quantity (953 units) using taxation or subsidy. The central planner should impose a [Answer 10A = A] (A. subsidy, B. tax) of [Answer10B 312.10 dollars per unit.

Please refer to the background information below to answer the following three questions. There are two groups of consumers, A and B, for herbal medicine with the following demand relations respectively: Group A: P 430 -0.6Q Group B: P=570 -0.1Q The market supply of herbal medicine is P=215+0.6Q where P is price per unit of herbal medicine (in dollars), and Q is quantity of herbal medicine. 8. Suppose the market is free of government intervention. We can compute that the market equilibrium price is [Answer08A = 519.29] dollars per unit, and the market equilibrium quantity is [ Answer08B507.14] units. 9. Suppose the central planner forces the economy to produce and exchange herbal medicine with the quantity of 953 units. We will expect a minimum welfare loss of [Answer0969576.01] dollars when compared to the market without intervention. 10. Suppose the central planner wants to achieve the same quantity (953 units) using taxation or subsidy. The central planner should impose a [Answer 10A = A] (A. subsidy, B. tax) of [Answer10B 312.10 dollars per unit.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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