Question

1

Suppose the demand for shoes is given by: Q_D= 210 -2P. The supply of shoes is given by: Q_S= 9P -120.

Calculate the Gains from Trade (also known as Economic Surplus) that would exist in this market in a competitive equilibrium.

2

Suppose the demand for jackets was given by: Q_D= 140 -0.4P. The supply of jackets is given by: Q_S= 4P -80. Suppose the price was $49 per jacket. Calculate whether there is a surplus or shortage of jackets at that price and the quantity of jackets associated with the surplus or shortage.

Enter your response as Q_S - Q_D. Negative numbers indicate shortage. Positive numbers indicate surplus.

3

The demand for wheat is given by: Q_D= 280 -P. The supply of wheat is given by: Q_S= 6P -280. Suppose the government imposes a a price ceiling of $64.

Calculate the dollar amount of deadweight loss from the price ceiling.

4

The demand for wheat is given by: Q_D= 186 -0.4P. The supply of wheat is given by: Q_S= 3P -120. Suppose the government imposes a a price ceiling of $68.

Calculate the dollar amount of consumer surplus from the price ceiling.

5

The demand for okra is given by: Q_D= 220 -P. The supply of okra is given by: Q_S= 8P -50. The government has implemented a price floor of $58.

Calculate producer surplus with the price floor.

Answer 1

(Question 1)

In equilibrium, QD = QS.

210 - 2P = 9P - 120

11P = 330

P = 33

Q = 210 - (33 x 2) = 210 - 66 = 144

From demand function, when QD = 0, P = 210

Consumer surplus (CS) = area between demand curve & price = (1/2) x (210 - 33) x 144 = 72 x 177 = 12,744

From supply function, when QS = 0, P = 120/9 = 13.33

Producer surplus (PS) = Area between supply curve & price = (1/2) x (33 - 13.33) x 144 = 72 x 19.67 = 1,416.24

Gains from trade (economic surplus) = CS + PS = 12,744 + 1,416.24 = 14,160.24

NOTE: As per Chegg Answering Policy, 1st question has been answered.