Question

Question 3 1 pts Assume that the market for Good X is defined as follows: Qp = 64 - 16P and Qs = 16P - 8. If the government imposes a price floor at $3.00, what is the welfare loss associated with this policy? $32 $16 $48 $9 $64 Question 4 1 pts Supply poby- Demand QdQ* Qs Quantity Using the diagram above, if a price floor was introduced at E, then producer surplus would be UFB OP'UGB OXUGB EGB VFB

Answer 1

Question 3 and demand for good Y QD = 64-16P - Supply Qs = 16P-8 Before Price Ploor, equilibrium occurs where Qp =Qs And at equilibrium Qo= Qs =Q Now equating Qo to Qs we get! 64-16 P = 168-8 =) - 32 p = - 72 =) P=$2.75 and equilibuum quantity will be found by substituting P= {2.25 i either QD or Qs equation. tance Q = 64 - 16P = 64-16 (2.25) =28 hits Now it the government imposes a price floor at $ 3.00, then we substitute P= 3.00 in Qp and as equation. This When P= 3:00, Quantity demanded Qo= 64-160 = 64-16(3) - 16 units and when P= 3:00 quantity supplied will be Qs = 16P- 8 =16(3)-8 40 Wits. Now QD = 64-16P, when P=0 => Q = 64-16 (0)=64 When po QD=0 => 64-16P =0 > 16P = 64 Now supply Qs = 168-8 When QSF0 - 16P = 8 O p = Ź =0.5 CS Scanned with when P-0 -> QS= 1600-8 5-8 CamScanner

Now we can graph the demand and Supply Curvest a puce supply 4 KA Price floor his 0.5 Drond y Quality e 16 28 40 the deadweight loss, which is the area pait C, we substitute Q = 16 in the Now, the welfare loss is 64 of A ABC. To get supply equation. Hace , Qs = 16P-8 1. 16=168-8 => 24=16P P= 1.5 Hunce the welfare loss or the deadweight loss = Area of A ABC = I x base x height - 1 x (28-16) x ( 3-15) policy is a a loss loss associated with this associated Hence the welfare Scanned with CamScanner
Question 4

Using the diagram above, if a price floor was introduced at E, then producer surplus would be:

Answer: The producer surplus is the area above the supply curve and below the price =E level, hence the producer surplus will be = area of triangle EGB. Hence the answer will be:

EGB.