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
Q. Explain the problem with IS-LM model? The starting point of AS-AD model is an assumption in IS-LM model (and in the cross model) that limits its usefulness. This is an assum

Equilibrium Income  The next step is to use the aggregate demand function, AD, to determine the equilibrium level of income and output. This is done in figure . Recall that the

All of the following fiscal policies will contribute to increasing budget deficits except: A. cuts in aid to farmers. B. tax cuts. C. increases in defense expenditures. D. increase

What is this underlined phrase above referring to in the chapter lecture? Select one: a. Physical capital b. Social capital c. Human capital d. Entrepreneurship e. Growth com

Suppose that Lilistan has two types of citizens: low-income citizens (income = $20,000) and high-income citizens (income = $80,000). Interest income is currently taxed and each typ

Question 1: (a) Distinguish between the short run and long run profits of a competitive firm by using graphical representations. (b) Compare and contrast between perfect c

discuss the effect that the activities of a trade union might have on an economy?

Using a flexible exchange rate system with imperfect capital mobility explain the impact that an open economy has on the effectiveness of monetary and fiscal policy. 2. Using a fl

Q. Show factors that govern the Price Elasticity of Demand? a. The number and closeness of the substitutes- The more and the better the substitutes, the grater is the Price Ela

Q. Explain IS curve with inflation? The IS curve with inflation  We can draw IS curve for a given value of π e . As earlier explained, IS curve isn't affected by changes