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: %3D • Maintain the number of...

Calculate the deadweight loss

Extracted text: 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: %3D • Maintain the number of quotas and let the market adjust, or • Maintain 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. (c) Calculate the (i) price observed in the market, HINT: Sketch the supply and demand equations. Answer:


Extracted text: Question 6 A market has a demand function given by the equation Qd = 180 – 2P, and a supply function given by the equation Qs = -15 + P. The market is government-regulated with a price support per unit and production quotas. (NOTE: A production quota is a restriction on the quantity of the good that can be produced. Firms are not allowed to %3D %D produce more than the quota) (a) If the price is set at $72 per unit, what production quota is needed to make sure there are no shortages or surpluses? HINT: Sketch the supply and demand equations.