1. The old demand was Qd = 180 – 2P. Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190 – 2P. The government is trying to decide between two options. Maintain the number of quotas and let the market adjust, or Maintain the price support and increase the number of quotas. a. Suppose that the government decides to maintain the number of quotas and let the market adjust. Calculate the following: Price observed in the market The consumer surplus The producer surplus Deadweight loss b. Suppose now that the government decides to increase the number of quotas available to 72 units, but it keeps the price support at the current level of $72. Calculate the following: The consumer surplus The producer surplus Deadweight loss

1. The old demand was Qd = 180 – 2P. Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190 – 2P. The government is trying to decide between two options. Maintain the number of quotas and let the market adjust, or Maintain the price support and increase the number of quotas. a. Suppose that the government decides to maintain the number of quotas and let the market adjust. Calculate the following: Price observed in the market The consumer surplus The producer surplus Deadweight loss b. Suppose now that the government decides to increase the number of quotas available to 72 units, but it keeps the price support at the current level of $72. Calculate the following: The consumer surplus The producer surplus Deadweight loss

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 2SQ

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The Demand curve for a good A is P = - 2Q+200 and the Supply curve is P=Q+10.A. Find the equilibrium Price and Quantity B. What is the level of total expenditure in this market?C. What is the price elasticity of demand at equilibrium? D. If there is a law that prevents you from consuming this good, how much should you be compensated by the government to accept it given the Consumer Surplus (CS)? Calculate.Demand shifts to P = - 2Q+260 due to an increase in the price of another good B from $20 to $25 E. Find the New Equilibrium, and Calculate the new Consumer Surplus and the Cross Price Elasticity of Demand. What type of goods are these?
In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by 25 per month. 50 per month.
Q. Show and describe what would happen to the demand or quantity demanded or quantity supplied or supply for a good in each of the following cases: a) a. an increase in the price of a substitute of your product, an increase in the number of suppliers and an increase in subsidies I b) b. an increase in the price of a complement, an increase in input prices and increasing costs of regulation. c) c. an increase in income, for a normal good, Freezing weather wipes out wheat crops in California
b) In a hypothetical situation, Government of Pakistan wants to put a curb on cigarette smoking through economic policy: i. Studies indicate that the price elasticity of demand for cigarettes is about 0.5. If a pack of cigarettes currently costs Rs.200 and the government wants to reduce smoking by 22 percent, by how much should it increase the price? ii. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking one year from now or five years from now? iii. Studies also find that teenagers have a higher price elasticity of demand than adults. Why might this be true?
Suppose the supply of a good by domestic firms is QSD = 10 + 2P and the supply by foreign firms is QSF = 10 + P. The domestic demand for the product is given by Qd = 30 − P. 1. In the absence of a quota, what is the total supply of the good? 2. What are the equilibrium price and quantity of the good? 3. Suppose a quota of 10 units is imposed. What is the total supply of the product? 4. Determine the equilibrium price in the domestic market under the quota of 10 units.
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Consider a public policy aimed at smoking. 1. The government commissioned a research firm, Super Consulting, to conduct a study on the market demand for cigarettes in Malaysia. The firm reported that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes costs $2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price? 2. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking after 1 year from now or 5 years from now? Explain 3.Super Consulting also found that teenagers have higher price elasticity than adults. Why might this be true? Explain 4. Outline and discuss the appropriate economic policies that can be implemented to reduce smoking.
The demand for butter is given by 120-4pd and the supply is 2ps-30, where pd and ps are, respectively the price paid by demanders and the price received by suppliers. a: Draw the demand and supply functions. b: Find the equilibrium quantity and price, and show them on the graph. c: Suppose a drought strikes that shifts the supply functions to 2ps-60. The demand remains the same. Draw the new supply function, and find the new equilibrium price and quantity.
Taxes & Subsidies Suppose that, in order to incentivize drivers to switch to electric vehicles, a government imposes a tax to be added to the purchase price of gasoline cars and a subsidy (discount voucher) on the purchase of electric cars. You can assume whatever you think is reasonable about the demand and supply elasticities to prices. Illustrate the likely effects of those policies using graphs. Discuss: What happens to the quantity of gasoline and electric cars in equilibrium? Who bears the burden of the tax, and who enjoys the subsidy in your model (between producers and consumers)? As a policymaker, do you want demand and supply curves to be more or less price elastic for the policy to work?
Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190 – 2P. The government is trying to decide between two options: Maintain the number of quotas and let the market adjust, orMaintain the price support and increase the number of quotas. Suppose that the government decides to maintain the number of quotas and let the market adjust. Calculate:ii) the consumer surplusiii) the producer surplusiv) dead weight loss HINT: Sketch the supply and demand equations. Which of the two options would be preferred by the producers? Which of the two options would be preferred by society as a whole?
Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190 – 2P. The government is trying to decide between two options: Maintain the number of quotas and let the market adjust, orMaintain the price support and increase the number of quotas. Suppose that the government decides to maintain the number of quotas and let the market adjust. Calculate:ii) the consumer surplusiii) the producer surplusiv) dead weight loss HINT: Sketch the supply and demand equations.
The figure below represents the market for Gasoline, where initially the equilibrium price was $5.60. The picture shows the effect of a $1.50 tax on gasoline. Using the information from the figure, what is the price elasticity of demand(Using the Midpoint method) when moving from equilibrium to the new demand after the tax?(Input the answer in absolute value and round it to 2 decimal places)