Price Controls and Quotas ― End of Chapter Problem The Venezuelan government has imposed a price ceiling on the retail price of roasted coffee beans. The accompanying diagram shows the market for coffee beans. In the absence of price controls, the equilibrium is at point E, with an equilibrium price of P₁ and an equilibrium quantity bought and sold of QE. After the introduction of the price ceiling, the price falls to Pc and the quantity bought and sold falls to Qc. a. Show the consumer surplus after the introduction of the price ceiling by using the shape CS (assuming that the consumers with the highest willingness to pay get to buy the available coffee beans; that is, assuming that there is no inefficient allocation to consumers). b. Show the producer surplus after the introduction of the price ceiling by using the shape PS (assuming that the producers with the lowest cost get to sell their coffee beans; that is, assuming that there is no inefficient allocation of sales among producers).
Price Controls and Quotas ― End of Chapter Problem The Venezuelan government has imposed a price ceiling on the retail price of roasted coffee beans. The accompanying diagram shows the market for coffee beans. In the absence of price controls, the equilibrium is at point E, with an equilibrium price of P₁ and an equilibrium quantity bought and sold of QE. After the introduction of the price ceiling, the price falls to Pc and the quantity bought and sold falls to Qc. a. Show the consumer surplus after the introduction of the price ceiling by using the shape CS (assuming that the consumers with the highest willingness to pay get to buy the available coffee beans; that is, assuming that there is no inefficient allocation to consumers). b. Show the producer surplus after the introduction of the price ceiling by using the shape PS (assuming that the producers with the lowest cost get to sell their coffee beans; that is, assuming that there is no inefficient allocation of sales among producers).
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter3: Demand And Supply
Section: Chapter Questions
Problem 56P: Table 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and...
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![Price Controls and Quotas ― End of Chapter Problem
The Venezuelan government has imposed a price ceiling on the retail price of roasted coffee beans. The accompanying diagram
shows the market for coffee beans. In the absence of price controls, the equilibrium is at point E, with an equilibrium price of PE
and an equilibrium quantity bought and sold of QE.
After the introduction of the price ceiling, the price falls to Pc and the quantity bought and sold falls to Qc.
a. Show the consumer surplus after the introduction of the price ceiling by using the shape CS (assuming that the consumers
with the highest willingness to pay get to buy the available coffee beans; that is, assuming that there is no inefficient allocation
to consumers).
b. Show the producer surplus after the introduction of the price ceiling by using the shape PS (assuming that the producers with
the lowest cost get to sell their coffee beans; that is, assuming that there is no inefficient allocation of sales among producers).
Price of coffee beans
Q
E
Quantity of coffee beans
Supply
Price ceiling
Demand
CS
▲PS](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0c6e5e61-c06f-45f9-ae36-33639f502f5f%2Fc99c49e5-4fbb-44a3-af0b-f38ef4a8f34a%2Fku1px38_processed.png&w=3840&q=75)
Transcribed Image Text:Price Controls and Quotas ― End of Chapter Problem
The Venezuelan government has imposed a price ceiling on the retail price of roasted coffee beans. The accompanying diagram
shows the market for coffee beans. In the absence of price controls, the equilibrium is at point E, with an equilibrium price of PE
and an equilibrium quantity bought and sold of QE.
After the introduction of the price ceiling, the price falls to Pc and the quantity bought and sold falls to Qc.
a. Show the consumer surplus after the introduction of the price ceiling by using the shape CS (assuming that the consumers
with the highest willingness to pay get to buy the available coffee beans; that is, assuming that there is no inefficient allocation
to consumers).
b. Show the producer surplus after the introduction of the price ceiling by using the shape PS (assuming that the producers with
the lowest cost get to sell their coffee beans; that is, assuming that there is no inefficient allocation of sales among producers).
Price of coffee beans
Q
E
Quantity of coffee beans
Supply
Price ceiling
Demand
CS
▲PS
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