2. Consider the country ABC. The demand function for product A is Q=500-4P, the supply function Q=100+4P. a) Draw the demand and supply curves. Find the equilibrium price and quantity for this market. b) If there is a price restriction of maximum $100 per unit of product A, what will be the equilibrium price and quantity for this market. What is the size of the shortage? c) The world price is $100. Should this country trade internationally? What will be the value of export/import? Find the quantity of consumption and production, the domestic price, the consumer surplus and producer surplus before and after the trade. Compare the total surplus.
2. Consider the country ABC. The demand function for product A is Q=500-4P, the supply function Q=100+4P. a) Draw the demand and supply curves. Find the equilibrium price and quantity for this market. b) If there is a price restriction of maximum $100 per unit of product A, what will be the equilibrium price and quantity for this market. What is the size of the shortage? c) The world price is $100. Should this country trade internationally? What will be the value of export/import? Find the quantity of consumption and production, the domestic price, the consumer surplus and producer surplus before and after the trade. Compare the total surplus.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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