Question

Ans) 1) At equilibrium, Qd = Qs

400 - 10P = -200 + 20P

400 + 200 = 20P + 10P

600 = 30P

P = 20

To determine the equilibrium quantity, put value of P in either demand or supply equation.

Qd= 400 - 10P = 400 - 10×20 = 200 units

Qs = -200 + 20P = -200 + 20×20 = 200units.

So, equilibrium price is \$20 and equilibrium quantity is 200 units.

2) Now,

At Q= 0 Qs= -200 + 20P

Qd = 400 -10P 0= -200 + 20P

0= 400 - 10P 200 = 20P

P = 40 P = 10

We have got, two points for demand curve ie (200,20).and (0,40)

We have also got two points for supply curve i.e (200,2) and (0,10)

Lets draw the graph using these two ÷

Consumer surplus = 1/2× base × height = 1/2× 200 × (40-20) = \$2000

Producer surplus = 1/2× base × height = 1/2× 200×(20-10) = \$1000

3) When price of land increases, input cost increases for meat. Supply curve will shift to the left and new equilibrium will be higher than the initial equilibrium. Price will increase and quantity will decrease.

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