Question 6 Suppose 3 P = P*; 3 Qd = Qs = Q* Numerically calculate the equilibrium price and quantity (Q*, P*) (you have done this in PS2) a) Find the numerical value of the consumer surplus. Make sure that you have shown all calculations. o) If consumers experience an income loss and the good is a normal good, suppose the new demand curve is given by QD = 260- 4P. Find the new consumer surplus. c) Draw a graph and show the new equilibrium, old equilibrium, new consumer surplus and the old consumer surplus.
Question 6 Suppose 3 P = P*; 3 Qd = Qs = Q* Numerically calculate the equilibrium price and quantity (Q*, P*) (you have done this in PS2) a) Find the numerical value of the consumer surplus. Make sure that you have shown all calculations. o) If consumers experience an income loss and the good is a normal good, suppose the new demand curve is given by QD = 260- 4P. Find the new consumer surplus. c) Draw a graph and show the new equilibrium, old equilibrium, new consumer surplus and the old consumer surplus.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question 6
• Suppose P = P*; Qd = Qs = Q*
• Numerically calculate the equilibrium price and
quantity (Q, P*) (you have done this in PS2)
a) Find the numerical value of the consumer surplus.
Make sure that you have shown all calculations.
b)
If consumers experience an income loss and the good
is a normal good, suppose the new demand curve is
given by QD = 260 - 4P. Find the new consumer
surplus.
-
c) Draw a graph and show the new equilibrium, old
equilibrium, new consumer surplus and the old
consumer surplus.
Transcribed Image Text:Information for Question 5 and 6
QD = 500 - 4P .....(market demand curve of
Jenni's ice cream)
●
●
• Qs = -100 + 2P .....(market supply curve of
Jenni's ice cream)
to deepen your knowledge.
Expert Solution
Step 1
Demand-supply equilibrium:
The demand function determines the willingness to pay of an individual for each unit of the quantity he or she wishes to consume.
Whereas, the supply function signifies the supplier's willingness to produce at each price.
The market equilibrium is derived where demand equates the supply.
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