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13 Dec 2019

consider a supply and demand system given by the following equations:

P=15-Qd

P=3+Qs

a. what is the equilibrium price and quanity

b. calculate consumer surplus, producer surplus, and total surplus.

c. suppose the supply curve shifts up by $4. what is the new equilibrium price and quanity?

d. calculate consumer surplus, producer surplus, and total surplus for the new equilibrium.

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Taxation Question (SHOW ALL WORK)

Suppose that the demand curve (hundreds) for apples is given by Qd = 140 - 5P, where Qd is the number of pounds demanded per year and p is the price per pound. The supply of apples can be described by Qs = 40 + 5P, where Qs is the number of pounds provided.

What is the equilibrium price? (Hint: At the equilibrium, quantity demanded and quantity supplied are equal, Qd = Qs.)

What is the equilibrium quantity supplied and demanded?

Calculate the consumer surplus at the equilibrium price.

Calculate the producer surplus at the equilibrium price.

Calculate the total surplus at the equilibrium price.

Now suppose that the government imposes a tax of $8 per each pound sold, paid by the producers. In this case, what are the price and the consumer surplus?

QD 950 - P and QS = 2P - 160

Welfare Effects of a Tariff:
Given the demand and supply equations above, suppose the free trade (world) price is $200.

a. Solve for the amount imported, consumer surplus, and producer surplus.

b. Suppose a per unit tariff of $30 is imposed by the government. Solve for the consumer surplus, producer surplus, government revenue and total surplus with the tariff.

c. Solve for the change in consumer surplus, the change in producer surplus, the change in government revenue and change in total surplus (i.e. the deadweight loss) from the free trade case (without the tariff). [To do this, make the calculations using your answers in 3a, and calculate total surplus under free trade].

Suppose that the Demand Function for a certain product is given by Qd = 180 –4P and Supply Function is given by Qs = -10 + P.

a. Compare the Consumer  Surplus, Producer Surplus, Deadweight Loss, and Government Revenue, before and after, imposing a per unit tax of Rs. 3 on Seller.

b. What would happen to Consumer Surplus, Producer Surplus, Deadweight Loss,  and Government Revenue if due to rise in Income New Demand Function takes a form of Qdn = 190 – 3P?

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