Please Answer Part "b" only In the country of Econland, there is a big market for tulips. The demand for tulipscan be expressed by Qd = 15000 – 1250Pa, where Pa is the price paid by consumersfor a tulip and Qa is the number of tulips demanded; the supply curve is Q, =1700P, – 3400, where P, is the price received by tulip suppliers and Q, is the numberof tulips supplied.(a) Initially, there is no government intervention in the tulip market. Find theequilibrium price and quantity, as well as both the producer and consumer surpluses.(b) The government is eager to increase its revenue, and has set its sights on thetulip market. It decides to impose an excise tax on tulips: from now on, for everytulip suppliers sell, they must pay the government $1. Given this, find the price con-sumers will pay, the price suppliers will receive, and the quantity sold. What is theconsumer surplus? What is the producer surplus? What is the change to governmentrevenue? Is there deadweight loss due to the tax, and if so how large is it?(c) Unsurprisingly, the government's tulip tax was unpopular with consumers. Inresponse, the government has decided to get rid of the tax. In its place, they im-pose a price ceiling on tulips equal to $5. Assume rationing is as efficient as possible(meaning the consumers with the highest willingness to pay are able to buy tulips).Given this, how many tulips will be supplied? What is the consumer surplus? Whatis the producer surplus? Is there deadweight loss due to the price ceiling, and if sohow large is it?(d) Assume now that rationing is as inefficient as possible (meaning that, amongconsumers willing to buy at the price level, only those with the lowest willingness topay are able to buy tulips). What is consumer surplus now? What is the size of thedeadweight loss?

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s the number of tulips demande- P, is the price received by tulip s is no government intervention i quantity, as well as both the proc

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter4: Demand, Supply, And Market Equilibrium

Section: Chapter Questions

Problem 4P

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