Suppose a market is described by the following demand and supply curves, respectively: Qd =50−PQs = 0.5P − 10(a) Calculate the equilibrium price and quantity.(b) Plot the supply and demand curves on a single graph.(c) Now, supposed the government imposes a price ceiling of $30 in this market.Show, on the same graph in part (b), the effect of this price ceiling.Calculate the equilibrium price and quantity.Is there a shortage or a surplus? Of how many units?What is the full economic price in this market?Show, on the same graph in part (b), the loss of social welfare and calculate the dollar value of this loss.

The equilibrium refers to economic conditions where the demand and supply forces are equal.

Answered: Suppose a market is described by the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose a market is described by the following demand and supply curves, respectively: Qd =50−P

Qs = 0.5P − 10

(a) Calculate the equilibrium price and quantity.
(b) Plot the supply and demand curves on a single graph.

(c) Now, supposed the government imposes a price ceiling of $30 in this market.
1. Show, on the same graph in part (b), the effect of this price ceiling.
2. Calculate the equilibrium price and quantity.
3. Is there a shortage or a surplus? Of how many units?
4. What is the full economic price in this market?
5. Show, on the same graph in part (b), the loss of social welfare and calculate the dollar value of this loss.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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