Given, Q_{D} = 5 - P
Q_{S} = 0.5P
A. Market equilibrium will be at that point where Quantity Demanded is Equal to Quantity Supplied
5 - P = 0.5P
1.5P = 5
Equilibrium price, P* = $ 3.33 per unit
Equilibrium Quantity, Q* = 1.67 units
B. Consumer Surplus, CS = (1/2)*(5 - 3.33)*1.67 = $ 1.39
Producer surplus, PS = (1/2)*(3.33 -0 )*1.67 = $ 2.78
Total surplus = Consumer Surplus + Producer surplus
Total surplus = $ 1.39 + 2.78
TS = $ 4.17
C. When a price floor of $4 is introduced
Quantity Demanded = 1
Price = 4
When Q = 1,
Price of supply = $2
Consumer Surplus = (1/2)*(5-4)*1 = $ 0.5
Producer surplus = (4-2)*1 +(1/2)*(2-0)*1 = $3
Deadweight loss = (1/2)*(1.67-1)*(4-2) = $ 0.67
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