Estimate demand or supply-equilibrium price, Macroeconomics

Assignment Help:

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


Related Discussions:- Estimate demand or supply-equilibrium price

Money and Banking, What is the relationship between deposit multipier,Credi...

What is the relationship between deposit multipier,Credit Multiplier and Deposit multiplier?

What is monetary base, What is Monetary base The monetary base is defin...

What is Monetary base The monetary base is defined as the total value of all currency (banknotes and coins) outside the central bank and commercial banks' (net) reserves with t

Perfect competition and monoploy, 1. # of sellers, # of buyers 2. entry and...

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

The micro-finance institutions in india, Have the micro-finance institution...

Have the micro-finance institutions failed in their objectives?

Define individual consumer and total producer surplus, Define the individua...

Define the individual consumer surplus and total producer surplus. Individual consumer: Individual consumer surplus is the net profit to an individual buyer through the purc

Credit multiplier, compute: credit multiplier, maximum change in the money ...

compute: credit multiplier, maximum change in the money supply

Consumption , . (40 points) Consider two consumers, A and B. A and B both w...

. (40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different i

Choice amonga lottery, You have a choice between a lottery lump sum payout ...

You have a choice between a lottery lump sum payout of $10,000,000 today or a series of 25 annual annunity payments the first payment will be one year from today ad a discount rate

Explain production as an income generating activity, Explain production as ...

Explain production as an income generating activity. What are the principal difference among government purchases of goods & service and transfer payments? Why are in

Liberalisation and trends in fdi, Foreign Direct Investment and Development...

Foreign Direct Investment and Development: In neo-classical economic theory, FDI involves  the movement of capital from capital abundant  to capital scarce host countries. Mun

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd