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Price of Good X ($) 20 18 16 14 12 10 8 6 4 2 0 0 1 The Market of Good X 2 3 Quantity of Good X 4 S 5 D a. What is consumer surplus, producer surplus and total surplus in this market? b. Suppose the government places a price ceiling of $8 on this market. Describe exactly what results from this price ceiling. 6 c. Are consumers better off after the government sets the price ceiling? How about producers? Provide numerical measures to support your response.

Price of Good X ($) 20 18 16 14 12 10 8 6 4 2 0 0 1 The Market of Good X 2 3 Quantity of Good X 4 S 5 D a. What is consumer surplus, producer surplus and total surplus in this market? b. Suppose the government places a price ceiling of $8 on this market. Describe exactly what results from this price ceiling. 6 c. Are consumers better off after the government sets the price ceiling? How about producers? Provide numerical measures to support your response.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Price of Good X ($) 20 18 16 14 12 10 00 (0) 4 2 0 0 1 The Market of Good X 2 3 Quantity of Good X 4 S 5 Ꭰ a. What is consumer surplus, producer surplus and total surplus in this market? b. Suppose the government places a price ceiling of $8 on this market. Describe exactly what results from this price ceiling. 6 Are consumers better off after the government sets the price ceiling? How about producers? Provide numerical measures to support your response. 3
Transcribed Image Text:Price of Good X ($) 20 18 16 14 12 10 00 (0) 4 2 0 0 1 The Market of Good X 2 3 Quantity of Good X 4 S 5 Ꭰ a. What is consumer surplus, producer surplus and total surplus in this market? b. Suppose the government places a price ceiling of $8 on this market. Describe exactly what results from this price ceiling. 6 Are consumers better off after the government sets the price ceiling? How about producers? Provide numerical measures to support your response. 3
== In these equations, Q measures output in gallons per month (in 1,000's), P is the price per gallon of the sanitizer, Y is annual average household income (in 1,000's), Pc is an index of commodity prices, and Ps is the average price per gallon of other types of sanitizer. 10 + 2P After gathering the latest you find that average household income is $36,400, the current level of the commodity price index is 110.6, and the average price per gallon of other types of sanitizers is $48.50. a. Find the current equilibrium price and quantity in this market. b. Find the equilibrium price and quantity in this market if the government imposes a $9 per gallon tax on sanitizers. Problem 4: c. What will happen to the price buyers pay per gallon as a result of the tax? d. What price will sellers receive (net price) per gallon after the tax? e. How much revenue will this tax raise for the government? f. How much of the tax burden is borne by buyers? How much is borne by sellers? g. What is the deadweight loss for society from this tax? Suppose that an economist estimated the following regression equation for the supply of grapefruit. Qs = 58+15P₁-20P Where PF is the per-ton price of fertilizer, Qs is in millions of pounds per month and the price of grapefruit is in dollars per pound. a. Determine how much the supply curve shifts if the price of fertilizer rises by $1.10 per unit. b. Explain why a change in the price of fertilizer causes a shift in supply for grapefruit rather than a movement along the supply curve. Problem 5: c. Holding the price of fertilizer constant, by how much would the price of grapefruit need to rise to cause an increase of 60 million pounds per month in the quantity of grapefruit supplied? Below you are given the graph of the demand and supply functions for Good X. Use this information (and any graphs you might want to construct) to answer the questions that follow.
Transcribed Image Text:== In these equations, Q measures output in gallons per month (in 1,000's), P is the price per gallon of the sanitizer, Y is annual average household income (in 1,000's), Pc is an index of commodity prices, and Ps is the average price per gallon of other types of sanitizer. 10 + 2P After gathering the latest you find that average household income is $36,400, the current level of the commodity price index is 110.6, and the average price per gallon of other types of sanitizers is $48.50. a. Find the current equilibrium price and quantity in this market. b. Find the equilibrium price and quantity in this market if the government imposes a $9 per gallon tax on sanitizers. Problem 4: c. What will happen to the price buyers pay per gallon as a result of the tax? d. What price will sellers receive (net price) per gallon after the tax? e. How much revenue will this tax raise for the government? f. How much of the tax burden is borne by buyers? How much is borne by sellers? g. What is the deadweight loss for society from this tax? Suppose that an economist estimated the following regression equation for the supply of grapefruit. Qs = 58+15P₁-20P Where PF is the per-ton price of fertilizer, Qs is in millions of pounds per month and the price of grapefruit is in dollars per pound. a. Determine how much the supply curve shifts if the price of fertilizer rises by $1.10 per unit. b. Explain why a change in the price of fertilizer causes a shift in supply for grapefruit rather than a movement along the supply curve. Problem 5: c. Holding the price of fertilizer constant, by how much would the price of grapefruit need to rise to cause an increase of 60 million pounds per month in the quantity of grapefruit supplied? Below you are given the graph of the demand and supply functions for Good X. Use this information (and any graphs you might want to construct) to answer the questions that follow.
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