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

Question, The greater the number of different goods available in an economy...

The greater the number of different goods available in an economy, Question 1 options: a) the less likely it is that a double coincidence of wants will exist, and the less likel

What are the crisis affect the economies of country, What are the crisis af...

What are the crisis affect the economies This crisis would affect the UK in 3 major ways. First the UK would be unable to sell its exports to these economies if they are hea

Steps to real wage rates to fall, Steps to real wage rates to fall Wage...

Steps to real wage rates to fall Wage 'stickiness' or wage inflexibility may stop the real wage rate falling to the full-employment wage rate. Stickiness or inflexibility is ca

First investment yields a gain, An investor has a choice of 2 investment op...

An investor has a choice of 2 investment opportunities. The first investment yields a gain of $2800 with probability of 0.37, a gain of $1100 with probability of 0.27, and otherwis

What is keynesian model, Q. What is Keynesian model? Keynesian model is...

Q. What is Keynesian model? Keynesian model is slightly more complicated than the classic model and it is developed in four stages by analysing four separate models. Every mode

Show the changes in the exchange rate, Q. Show the Changes in the exchange ...

Q. Show the Changes in the exchange rate? Assume that United States is our home country and the current euro exchange rate in direct notation is SD = 1.5 (euro/USD). In indirec

Give detail explanation of exchange rate, Give detail explanation of Exchan...

Give detail explanation of Exchange Rate In most countries, exchange rate is expressed using foreign currency as base currency. For instance, in Denmark, USD exchange rate woul

Trade cycle, discus the various measures that may be taken by a firm to cou...

discus the various measures that may be taken by a firm to counteract the evil effect of a trade cycle

What do you mean by price index, Q. What do you mean by Price index? Be...

Q. What do you mean by Price index? Because we are only interested in percentage change of the price level and not particular value, we can divide every price level by a given

Explain about penicillic acid, Q. Explain about Penicillic Acid? This m...

Q. Explain about Penicillic Acid? This mycotoxin has biological properties similar to patulin. It is produced by a large number of fungi, including many Penicillia as well as m

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