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

Lower price in restaurant, A restaurant/bar is analyzing its pricing of bee...

A restaurant/bar is analyzing its pricing of beer. It has determined that the price elasticity of demand for beer is 0.8, the cross-price elasticity for wine with respect to the pr

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

Find real interest rate and nominal interest rate, #questionAssume that an ...

#questionAssume 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

Issctes related to balance of payments, ISSUES RELATED TO BALANCE OF PAYMEN...

ISSUES RELATED TO BALANCE OF PAYMENTS: It  is to be remembered that the Indian economy witnessed varying intensities of BOP problem during 1956-9  1.  However over the 1990s,

Analysis, provide data and analysis for the real GDP (as total and per capi...

provide data and analysis for the real GDP (as total and per capita) and its growth rate then draw a graph and identify the periods of the Malaysia’s business cycle 2007 -2011

Democracy survive if a majority of the citizen, Can democracy survive if a ...

Can democracy survive if a majority of the citizen pays little or nothing in taxes while benefiting directly from a higher level of government spending? Why or why not?

Example of introducing the government- accounting system, Example of Introd...

Example of Introducing the Government- ACCOUNTING SYSTEM   So far there was no government in any of our stylized economies. Let us now introduce it. To begin with, our governmen

Calculate percent removal pollutant and steady state, You are considering t...

You are considering three design alternatives for treating a pollutant in wastewater using a first-order process ( k = 1 min -1 ). The total flow is 10 million gallons per day (mg

Macroeconomic problems, Question 1: The common characteristics of LDC...

Question 1: The common characteristics of LDCs include low GDP per capita, capital scarcity, high unemployment, chronic budget deficit, high levels of external debt, hig

Adjustment to equilibrium, reason why the change in equilibrium of output i...

reason why the change in equilibrium of output is greater than the change in initial invest ..

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