6. A record company estimates the industry demand for "hard alternative rock" albums to be: QD = 1000 -125-P. It estimates the industry supply to be: QS = 125-P. a. Given these estimates, what does it expect the industry output and price to be? b. A government commission announces that lyrics on "hard alternative rock" albums are offensive and should be banned. This causes consumers to purchase 20% more of such albums at any given price, compared to question 6a. What effect will this have on industry output and the price? c. Calculate the consumer surplus for parts a and b above. Are consumers better or worse off given the commission's recommendation?
6. A record company estimates the industry demand for "hard alternative rock" albums to be: QD = 1000 -125-P. It estimates the industry supply to be: QS = 125-P. a. Given these estimates, what does it expect the industry output and price to be? b. A government commission announces that lyrics on "hard alternative rock" albums are offensive and should be banned. This causes consumers to purchase 20% more of such albums at any given price, compared to question 6a. What effect will this have on industry output and the price? c. Calculate the consumer surplus for parts a and b above. Are consumers better or worse off given the commission's recommendation?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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