Partial equilibrium and surplus, Macroeconomics

The city of Cabernet is very famous for its production of wine. The inhabitants of the city have an aggregate demand for wine that can be described as follows:

D(p) = Qd =150-2p

where Qd is the demanded quantity in bottles of wine and p is the price in euros per bottle. The producers' aggregate supply is:

S(p) = Qs =13p-15

where Qs is the supplied quantity in bottles of wine. The city produces only one quality of wine.

a) Find the equilibrium price and quantity.

b) Compute the consumer and producer surplus, as well as the total welfare in the city of Cabernet.

The municipality of Cabernet decides to put a tax of €7.50 on every bottle of wine sold.

c) Compute the new equilibrium price and quantity and calculate the allocative inefficiency.

d) Assume that the municipality equally redistributes tax revenues to the inhabitants. Are they better off compared to the situation before the tax was introduced?

Posted Date: 3/9/2013 1:24:25 AM | Location : United States







Related Discussions:- Partial equilibrium and surplus, Assignment Help, Ask Question on Partial equilibrium and surplus, Get Answer, Expert's Help, Partial equilibrium and surplus Discussions

Write discussion on Partial equilibrium and surplus
Your posts are moderated
Related Questions
what is lemda in marginal utility. And how does it affect the consumption

For this question you will use the dataset "march01.dat", which includes wages (column 1), age (column 2), a dummy variable indicating females (column 3), and years of education (c

It is sometimes asked whether credit cards are money since many purchases are made using these. Credit cards are a means of obtaining credit and using this to finance expenditure,

what does phillip curve signify? how do you reconcile the difference in the shap of the curve in the short run and the long run?

2. Given the following information: Consumers are very optimistic about the future. The price of oil has just doubled. The money supply is growing at a 6% rate. The government has

Is the natural rate of unemployment fixed? Why or why not? How are full employment and the natural rate of unemployment related? Is the actual rate of unemployment currently greate


When investment banks underwrite IPOs, they are typically sell stock for 5-10 percent more than they pay for it. When they underwrite stock for companies that are already public, t

Q. Describe Exports and imports in AS-AD model? Exports and imports. This is more difficult to justify owing to exchange rate. Suppose that we have a flexible exchange rate a

Overnight interest rate of Central banks When the central bank buys government securities, it purchases from many individuals, companies and institutions. Deposits and reserves