Estimate demand or supply-equilibrium price, Macroeconomics

Suppose that the demand curve 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 + 3P, where Qs is the number of pounds provided.

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

equate demand to supply

140-5P=40+3P

100=8P

P= 12.5

B   What is the equilibrium quantity supplied and demanded?

Put the value of P in demand, supply equation In supply equation we get Q= 77.5 = 40+3*12.5 = quantity demanded = quantity supplied as this is an equilibrium point

C   Calculate the consumer surplus at the equilibrium price.

We need price when Qd= 0

Put Qd= 0 in demand equation to get P= 140/5 =28

Consumer surplus = ½*(28-12.5) *77.5 = 600.625

D  Calculate the producer surplus at the equilibrium price.

We need price when Qs= 0

Put Qs= 0 in supply equation to get P= -40/3

Producer surplus = ½*(12.5-(-40/3) *77.5 = 1000.9125

E Calculate the total surplus at the equilibrium price.

Total surplus = 600.625+1000.6125 = 1601.0375

F  Now suppose that the government imposes a tax of $8 per each pound sold, paid by

the consumers,. In this case, what are the price and the consumer surplus? 

Now supply curve becomes Qs= 40+3(p-8) = 16+3p

For equilibrium:

16+3p = 140-5p

8p = 124

P = 15.5 and Q= 140-5*15.5=62.5

Consumer surplus = ½*(28-15.5)*62.5 = 390.625

Posted Date: 3/6/2013 4:42:27 AM | Location : United States







Related Discussions:- Estimate demand or supply-equilibrium price, Assignment Help, Ask Question on Estimate demand or supply-equilibrium price, Get Answer, Expert's Help, Estimate demand or supply-equilibrium price Discussions

Write discussion on Estimate demand or supply-equilibrium price
Your posts are moderated
Related Questions
A few years ago, the Federal Communications Commission (FCC) eliminated a rule that required Baby Bells to provide rivals access and discounted rates to current broadband facilitie

INDEX NUMBERS OF PRODUCTION  Among the commonly used economic indicators to monitor current trends in the economy are indices of production. The main aggregative indices used t

Those economists who believe that monetary policy is more potent than fiscal policy argue that the: A) Responsiveness of money demand to the interest rate is large. B) Responsive

# ???? .. difference between gdp at market price and nnp at factor cost

At first, Say's Law may seem 'obvious'. Though, it's not - actually, it's highly controversial. The reason it may seem obvious is that you have perhaps learned from microeconomics

using the fisher equation what can you infer about expected inflation in canada and in the united states?

1. # of sellers, # of buyers 2. entry and exit conditions 3. product characteristics 4. short run P&Q determinations and the resulting 3 possibilities for excess profit (graphs ar

How will each of the following bases for hospital reimbursement affect the number of admissions, the average length of stay, the volume of services per day, and the unit cost of se

Q. Definition of Money? Before talking over macroeconomic models we should define what we mean by money. Money has aninteresting and long history and an understanding of how we

Equilibrium in the money market  In the IS-LM-model, we have equilibrium in the money market when MD(Y, R) = MS   This is the equation