The supply and demand curves for bananas are as follows: QD = 3,750 - 725P QS = 920 + 690P where Q = millions of bushels and P = price per bushel. a) Calculate the equilibrium price and quantity that would prevail in the free market. b) The government has imposed a $2.80 per bushel support price. How much bananas will the government be forced to purchase? c) Calculate the change (gain/loss) in consumer surplus that would occur due to the support program. Does the consumer surplus increase or decrease under the program?
The supply and demand curves for bananas are as follows: QD = 3,750 - 725P QS = 920 + 690P where Q = millions of bushels and P = price per bushel. a) Calculate the equilibrium price and quantity that would prevail in the free market. b) The government has imposed a $2.80 per bushel support price. How much bananas will the government be forced to purchase? c) Calculate the change (gain/loss) in consumer surplus that would occur due to the support program. Does the consumer surplus increase or decrease under the program?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The
QD = 3,750 - 725P
QS = 920 + 690P
where Q = millions of bushels and P = price per bushel.
a) Calculate the
b) The government has imposed a $2.80 per bushel support price. How much bananas will the government be forced to purchase?
c) Calculate the change (gain/loss) in
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