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
I want a Fiscal policy in the School of rational expectations.

In what major way do the Microsoft and Standard Oil cases differ?

The following is the information from the national income accounts for a hypothetical country: GDP Rs. 6000.00 Gross Investment Rs. 800.00 Net Investment Rs. 200.00 Consumption Rs.

Give an example of a current event opportunity cost that includes graphs


When a country abandons its national currency and adopts the currency of the United States, this is known as: A) A floating exchange rate system. B) Dollarization. C) A speculat

The Government, Rest of the World and the financial markets total expenditure of government can be divided into two parts: transfers to private sector and consumption.

Joans Nursery specializes in custom-designed landscaping for residential areas. The estimated labor cost associated with a particular landscaping proposal is based on the number of

Explain the notion of the hidden momentum of population growth. Why is this an important concept for projecting future population trends in different developing nations?

The LM curve  The LM curve shows all combinations of R and Y, where the money market is in equilibrium. The LM-curve slopes upwards. Mone