Solve subpart 4.Suppose the supply and demand curves for a particular product are given byQs=-20+2p Qd=100-2pWhere Qs and Qd are quantities in units and P is the price per unit.Graph the supply and demand curves. Be sure to calculate the P and Q intercepts for demand and the P intercept for supply. Calculate and illustrate the equilibrium price and quantity.Calculate both the demand and supply elasticity around the equilibrium point.Suppose the government implements a price ceiling of $20/unit in this market. Is the price ceiling binding on the market? What are the quantities demanded and supplied at the price ceiling? How many units are exchanged at this price? Given the effects of the policy, is there a potential for illegal trade? Briefly explain your answers where necessary.What is the value of the economic surplus that would be generated in the original equilibrium? Is there a deadweight loss due to the price ceiling policy, and if so, what is its value? Briefly explain.

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Answered: What is the value of the economic…

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 2TY

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Solve subpart 4.

Suppose the supply and demand curves for a particular product are given by

Qs=-20+2p Qd=100-2p

Where Qs and Qd are quantities in units and P is the price per unit.

Graph the supply and demand curves. Be sure to calculate the P and Q intercepts for demand and the P intercept for supply. Calculate and illustrate the equilibrium price and quantity.
Calculate both the demand and supply elasticity around the equilibrium point.
Suppose the government implements a price ceiling of $20/unit in this market. Is the price ceiling binding on the market? What are the quantities demanded and supplied at the price ceiling? How many units are exchanged at this price? Given the effects of the policy, is there a potential for illegal trade? Briefly explain your answers where necessary.
What is the value of the economic surplus that would be generated in the original equilibrium? Is there a deadweight loss due to the price ceiling policy, and if so, what is its value? Briefly explain.

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