Suppose that the demand curve for wheat is Q = 100 – 10p and the supply curve is Q = 10p. The government imposes a price ceiling of p = 3. a. Describe how the equilibrium changes.   b. What effect does this price ceiling have on consumer surplus, producer surplus, and dead-weight loss?

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Chapter8: Application: The Cost Of Taxation
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Suppose that the demand curve for wheat is Q = 100 – 10p and the supply curve is Q = 10p. The government imposes a price ceiling of p = 3.

a. Describe how the equilibrium changes.

 

b. What effect does this price ceiling have on consumer surplus, producer surplus, and dead-weight loss?

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