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

Describe endogenous growth theory, Q. Describe Endogenous growth theory? ...

Q. Describe Endogenous growth theory? Endogenous growth theory or new growth theory was developed in the 1980s by Paul Romer and others. In neo-classical model, technological p

Describe the macroeconomic variables, Q. Describe the macroeconomic variabl...

Q. Describe the macroeconomic variables? In this section we have summarizes all the macroeconomic variables. The first column denotes the symbol we use for variable whereas col

Balance of payment, with the help of a graph, explain factors that may caus...

with the help of a graph, explain factors that may cause a shift in the balance of payments

Spss , (I am providing them below) of Module 5 before beginning this assign...

(I am providing them below) of Module 5 before beginning this assignment.  You will have the opportunity to work through much of the assignment during the group activity for week 1

What causes economic growth, What causes economic growth? Causes of ec...

What causes economic growth? Causes of economic growth: Into the Solow model, economic growth is based onto the quantity and quality of technology and resources. Growth

Macroeconomics policy, explanations to the short-run fluctuation and pilicy...

explanations to the short-run fluctuation and pilicy prescriptions of the schools macroeconomics thought

Survey of household spending, In 2007, based upon the Survey of Household S...

In 2007, based upon the Survey of Household Spending of 2005, Statistics Canada announced the following weights for the major spending categories tracked by the CPI.

Determine optimum output and price levels, Given the demand and cost data y...

Given the demand and cost data you will have available (see information below), briefly describe the process you would use to determine optimum output and price levels in the devel

Determine the term- gdp per capita, Determine the term- GDP per capita ...

Determine the term- GDP per capita GDP, being a flow, isn't a measure of the total wealth of a country though a measure of the "income" of country during a certain period of ti

Production possibility curve, PRODUCTION POSSIBILITY CURVE As we have s...

PRODUCTION POSSIBILITY CURVE As we have seen, the essence of economic analysis is the problem of scarcity and choice. We know that limited productive resources compel individua

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