Determine cost to the govt of buying firms unsold units

Reference no: EM13207354

Consider a market where supply and demand are given as:

Qd = 56 - 2P Qs = -10 + P

Suppose the government imposes a price floor of $25, and agrees to purchases any and all units consumers do not buy at the floor price of $25 per unit

a. Determine the cost to the government of buying firms' unsold units.

b. Compute the social welfare (deadweight loss) that stems from the $25 price floor

Reference no: EM13207354

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