Gasoline for cars is produced in a market. There are equations for the Supply and Inverse Demand of car gasoline that model its Supply and Demand graph. These equations are (for supply), P = 20 + Qs, and (for Inverse Demand), P = 80 - Qd. Due to gasoline shortages, some sellers may be able to get access to more gasoline and produce it better than others. As a result, the federal government placed a quantity restriction of 15 units on the sellers. (Part I) Draw the market equilibrium with the government intervention (Q** and P**) of the quantity restriction. Please label the graph for slopes, the equilibrium point, etc. (Part II) What is the market equilibrium without the intervention of the government? (Part III) The government decided that the previous quantity restriction was not sufficient. So, it increased the restriction from 15 units to 20 units. Consequently, what is the new market equilibrium point with this new intervention? It is not necessary to label this point on the graph. (Part IV) What is the effect of the change in the first quantity restriction of 15 units to the revised restriction of 20 units on the Dead Weight Loss (DWL**)? Basically, please determine the dead weight loss before the change and after the change in the quantity restriction.
Gasoline for cars is produced in a market. There are equations for the Supply and Inverse
(Part I) Draw the
(Part II) What is the market equilibrium without the intervention of the government?
(Part III) The government decided that the previous quantity restriction was not sufficient. So, it increased the restriction from 15 units to 20 units. Consequently, what is the new market equilibrium point with this new intervention? It is not necessary to label this point on the graph.
(Part IV) What is the effect of the change in the first quantity restriction of 15 units to the revised restriction of 20 units on the Dead Weight Loss (DWL**)? Basically, please determine the dead weight loss before the change and after the change in the quantity restriction.
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