Supply and demand In the market for widgets, the supply and demand curve are "normal" 45° lines. The equilibrium price is £5 and the equilibrium quantity is 10 widgets. 6. (a) The government sets a maximum price for widgets of £2. Show the effect of this policy in a large suitably labelled graph on widget supply, widget demand, and the amount of widgets sold.
Supply and demand In the market for widgets, the supply and demand curve are "normal" 45° lines. The equilibrium price is £5 and the equilibrium quantity is 10 widgets. 6. (a) The government sets a maximum price for widgets of £2. Show the effect of this policy in a large suitably labelled graph on widget supply, widget demand, and the amount of widgets sold.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please answer question 6-a
![Section B- Theory
5. Choice under uncertainty
Alice would be willing to pay up to £15 for a gamble giving a 35% chance of £50 and a 65%
chance of £10.
(a) What is the expected value of this gamble? Represent Alice's preference over
risk in a large, suitably labelled graph. The graph should include Alice's
expected utility from the gamble described above.
6.
(b) Represent on the same graph the maximum amount that Alice would pay to
remove the risk from this gamble.
Supply and demand
In the market for widgets, the supply and demand curve are "normal" 45° lines. The
equilibrium price is £5 and the equilibrium quantity is 10 widgets.
(a) The government sets a maximum price for widgets of £2. Show the effect of
this policy in a large suitably labelled graph on widget supply, widget demand,
and the amount of widgets sold.
(b) Show in a new graph how your answers would change if the supply curve was
infinitely inelastic.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F73b195af-31bb-4095-80cb-53f5d4e01bc4%2F8b790704-350e-4bc2-8e1a-5f84eb205bfe%2Fyh32jn2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Section B- Theory
5. Choice under uncertainty
Alice would be willing to pay up to £15 for a gamble giving a 35% chance of £50 and a 65%
chance of £10.
(a) What is the expected value of this gamble? Represent Alice's preference over
risk in a large, suitably labelled graph. The graph should include Alice's
expected utility from the gamble described above.
6.
(b) Represent on the same graph the maximum amount that Alice would pay to
remove the risk from this gamble.
Supply and demand
In the market for widgets, the supply and demand curve are "normal" 45° lines. The
equilibrium price is £5 and the equilibrium quantity is 10 widgets.
(a) The government sets a maximum price for widgets of £2. Show the effect of
this policy in a large suitably labelled graph on widget supply, widget demand,
and the amount of widgets sold.
(b) Show in a new graph how your answers would change if the supply curve was
infinitely inelastic.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education