Consider the market demand and supply given by the following: Qd = 50 â P and Qs = 2.5 + 1.5P. Use this information to answer the following questions. What is the equilibrium price and quantity? If the government sets a price floor of $25, what is the surplus/shortage? If the government buys the surplus, what would be the cost to the government?

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Kelleb MloyiLv2

28 Sep 2019

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Related questions

The wheat market is perfectly competitive, and the market supply and demand curves are given by the following equations:

QD=20,000,000-4,000,000P

QS=7,000,000+2,500,000P, where QD and QS are quantity demanded and quantity supplied measured in bushels, and P=price per bushel.

a.) Determine consumer surplus at the equilibrium price and quantity.

b.) Assume that the government has imposed a price floor at $2.25 per bushel and agrees to buy any resulting excess supply. How many bushels of wheat will the government be forced to buy? Determine consumer surplus with the price floor.

taupegerbil480

Suppose that in the market for aluminum rods the demand and supply functions are given by:
Demand Function: QD = 300 â 2.5PSupply Function: QS = 5P - 15
Where P = price per aluminum rod and Q = number of aluminum rods
(a) Find the initial equilibrium price and quantity. Calculate the initial consumer surplus (CS) andproducer surplus (PS).
(b) Suppose the government imposes a price floor on aluminum rods. Aluminum rods must now sell for$50 per unit. Will there be a surplus or a shortage of aluminum rods at the price floor? Calculate theamount of the surplus or shortage.
(c) Calculate the consumer surplus (CS) and producer surplus (PS) after the imposition of the price floor.Calculate the deadweight loss associated with the imposition of the price floor.
(d) Are households better off or worse off after the imposition of the price floor? Are firms better off orworse off after the imposition of the price floor? Use your answers from Parts (a) and (c) to explain youranswer.