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Suppose the demand function for a product is Q= 200 -15P + 4I where P is the per-unit price of the good, I is median household income in thousands of dollars, and Q is the number of units demanded per month. Use the equation and assume that median family income remains at $30,000.

a. If the equation for the supply curve is Q = 40P - 10, calculate the equilibrium price and for this good. How much will be bought and sold?

b. If the government imposes a price ceiling at $5, Will a shortage or surplus result? How large will it be?

c. If the government instead imposes a price ceiling at $11, what will the impact be? Explain.

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Insha Fatima
Insha FatimaLv10
28 Sep 2019

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Related questions

Assume that products A and B are produced in competitive markets by different firms and are close substitutes. How would an increase in the price of product A affect the price of product B, and total expenditure on product B? Explain your answer.

Suppose the demand function for a product is Q= 200 -15P + 4I where P is the per unit price of the good, I is median household income in thousands of dollars, and Q is the number of units demanded per month.

a. Is the Law of Demand met? How do you know?

b. Is this good normal or inferior? How do you know?

c. If median family income is $30,000, what is the equation for the demand curve? Calculate point price elasticity at a price of $10. Is demand relatively elastic or inelastic at this price? How do you know?

d. Again assuming that median family income remains at $30,000, calculate arc price elasticity between a price of $10 and $12.

Price CSO 01 02 03 04 Quantity 27. Refer to figure F998. If the market in this figure is in equilibrium at P Q. and the demand curve shifts to Do what will happen if the government imposes a price ceiling at Pı? a. There will be an increase in supply to regain equilibrium b. A surplus of the amount D-A will occur. C. A shortage of the amount Q3 - Q1 will occur. d There will be Qi units actually bought. e. Both c and d.

1- When a price ceiling is imposed, long lines are likely to follow. The value of the time wasted waiting in these lines should be equal to the difference between the market equilibrium price and the imposed price ceiling.

Suppose that demand for a good is given by Q = 122 - 3P, while supply for the good is given by Q = 1P - 20. The average person values their time at $12.29/hour. If a price ceiling of $11.04 is imposed, how many hours will the average person have to wait in line?

2- Suppose that demand for a good is given by Q = 132 - 3P, while supply for the good is given by Q = 2P - 5. If a price ceiling of $11.96 is imposed, what will be the area of the deadweight loss?

3-

The unemployment rate is the percentage of workers who are seeking a job at the prevailing wage, but who are unable to get one. When a minimum wage is imposed, it creates some unemployment among minimum wage workers.

Suppose that the demand for labor is given by Q = 56 - 1W, where 'W' is the hourly wage rate, and the supply of labor is given by Q = 5W - 5. Imagine that a minimum wage of $22.68/hour is imposed by law.

What will be the unemployment rate for workers in this market?

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