Answered: Due to good weather, there is an…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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Question

(20). Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd=190-2p. The government is trting to decide between two options:

Maintain the number the number of quotas and let the market adjust , or
maintain the price support and increase the number of quotas.

suppose that the government decides to maintain the number of quotas and let the amrket adjust.

calculate

price observe in the market
consumer surplus
producer surplus
deadweight

(21). suppose now that the government decides to increase the number of quota available to 72 units but it keeps the price support at the current level at $72.

calculate

the consumer surplus

the producer surplus

the deadweight

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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