The Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Suppose the supply and demand functions for widget-corn are: QD = 100 – 5P QS = 5P. P is the price in dollar and Q is the quantity in kilograms. Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-corn sellers to charge $5 per kilogram. Calculate the impact of the policy on the quantity of widget-corn supplied and demanded. Explain the impact of the policy consumer surplus, producer surplus, and total economic surplus. Is the outcome of the government’s policy efficient and, therefore, maintained or abandoned? Explain in detail.
The Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Suppose the supply and demand functions for widget-corn are: QD = 100 – 5P QS = 5P. P is the price in dollar and Q is the quantity in kilograms. Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-corn sellers to charge $5 per kilogram. Calculate the impact of the policy on the quantity of widget-corn supplied and demanded. Explain the impact of the policy consumer surplus, producer surplus, and total economic surplus. Is the outcome of the government’s policy efficient and, therefore, maintained or abandoned? Explain in detail.
Chapter5: Demand For Health And Medical Care
Section: Chapter Questions
Problem 9QAP
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The Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Suppose the supply and demand functions for widget-corn are:
QD = 100 – 5P
QS = 5P.
P is the price in dollar and Q is the quantity in kilograms.
Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-corn sellers to charge $5 per kilogram.
- Calculate the impact of the policy on the quantity of widget-corn supplied and demanded.
- Explain the impact of the policy
consumer surplus ,producer surplus , and total economic surplus. - Is the outcome of the government’s policy efficient and, therefore, maintained or abandoned? Explain in detail.
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