The demand and supply functions for basic cable TV in the local market are given as: QD = 200,000 – 4,000P QS =20,000 + 2,000P. If the government implements a price ceiling of $15 on the price of basic cable service, what will be the quantity of cable service that will prevail in the market? Is there a surplus or a shortage, and if so, how much? With the new government policy, is there a deadweight loss in the market? If so, why is there a deadweight loss and how much is the deadweight loss? Are consumers better off or worse off with this policy? Are producers better off or worse off? Is society on the whole better off or worse off?
The demand and supply functions for basic cable TV in the local market are given as: QD = 200,000 – 4,000P QS =20,000 + 2,000P. If the government implements a price ceiling of $15 on the price of basic cable service, what will be the quantity of cable service that will prevail in the market? Is there a surplus or a shortage, and if so, how much? With the new government policy, is there a deadweight loss in the market? If so, why is there a deadweight loss and how much is the deadweight loss? Are consumers better off or worse off with this policy? Are producers better off or worse off? Is society on the whole better off or worse off?
Chapter4: Markets In Action
Section: Chapter Questions
Problem 15SQ
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The demand and supply functions for basic cable TV in the local market are given as:
QD = 200,000 – 4,000P
QS =20,000 + 2,000P.
- If the government implements a
price ceiling of $15 on the price of basic cable service, what will be the quantity of cable service that will prevail in the market? Is there a surplus or a shortage, and if so, how much? - With the new government policy, is there a
deadweight loss in the market? If so, why is there a deadweight loss and how much is the deadweight loss? - Are consumers better off or worse off with this policy? Are producers better off or worse off? Is society on the whole better off or worse off?
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