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

Set up a diagram.., (a) Use this information to set up a diagram showing th...

(a) Use this information to set up a diagram showing the firm''s total revenue and total cost schedules. In this diagram, show the points at which the firm is maximizing profits.

Definition of exchange rate, Definition of Exchange rate The exchange r...

Definition of Exchange rate The exchange rate is stated as the price of one unit of currency in terms of other currency. If one euro costs 1.5 USD then 1 USD costs 1/1.5 = 0.66

Basic concepts and terminology, when domestic currency becomes more valuabl...

when domestic currency becomes more valuable in terms of foreign currency, the domestic currency is said to have

Estimated profit of typical start-up businesses, Typical start-up businesse...

Typical start-up businesses' estimated profit are forecasted as following: State Bad Good Probability 81% 21%

Equilibrium interest rates, I am in a college econ class that I may possibl...

I am in a college econ class that I may possibly fail. anyone able to explain how to find this answer? Assume that the following data characterize the hypothetical economy of Tran

Peers for a country, What are the best criteria to select peers for a count...

What are the best criteria to select peers for a country ?

Relationship between l and p, Q. Relationship between L and P? • As lon...

Q. Relationship between L and P? • As long as L is smaller than LB, L may change with no change in prices. In this range, there is no relation between L andP. • When L is betw

Find real interest rate and nominal interest rate, Assume that an economy's...

Assume that an economy's GDP Y=5000. Also assume that the government runs a deficit where tax revenue T=1000 and government expendituresG= 1500. The consumption function is represe

Toms price elasticity of demand, Two drivers --- Tom and Jerry --- each dri...

Two drivers --- Tom and Jerry --- each drives up to a gas station. Before looking at the price, each places an order. Tom says, "I'd like 10 gallons of gas." Jerry says, "I'd like

Elucidate the factors of global demand and supply, Many economists and mark...

Many economists and market analysts are avid followers of the BALTIC DRY INDEX (BDI) as a forward looking mechanism that may shed a bit of light on the evolution of global economic

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