Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 16, Problem 4P
A
To determine
The gain and losses from price support in the given case using a supply-demand diagram.
B
To determine
The gain and losses from price support in the given case using a supply-demand diagram.
C
To determine
The gain and losses from price support in the given case using a supply-demand diagram.
D
To determine
The gain and losses from price support in the given case using a supply-demand diagram.
E
To determine
The gain and losses from price support in the given case using a supply-demand diagram.
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1. Suppose market demand for gasoline is given by QD = 60-2P where QD is quantity demanded and P is the
market price. Market supply is given by Qs = 4P where Qs is quantity supplied and P is the market price.
(a) Find the equilibrium price and quantity in this market.
(b) What is the consumer surplus and producer surplus?
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paid by suppliers). What is new equilibrium posted price? How much of that price do producers keep?
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Question 2(a) What is the difference between a quota and a subsidy?(b) Explain, using a demand and supply diagram, what effect is likely to occur in a market if the government introduces a subsidy in the production of a good.(c) Discuss whether the elasticity of supply of manufactured goods is likely to be greater than the elasticity of supply of agricultural goods.(d) Can a business change the price elasticity of its demand? If yes, how?(e) How would the knowledge of PED and PES be useful for a farmer?Question 3Major news channel in the country reports that ‘Inflation has been kept at 2 % for the past year which is the lowest it has been for three years. Unemployment has also decreased.’(a) According to this statement, what has happened to the price levels in the country over past three years?(b) Explain what is inflation and how is it measured?(c) Analyze why a reduction in interest rate may cause inflation?(d) Is inflation always bad? What is likely to happen if a country has…
3. The demand for a product is given by the equation Qd = 500 - 2P, and
the supply is given by Q = 100+ 3P.
(a) Determine the equilibrium price and quantity.
(b) The government imposes a price ceiling of $50. What will be the
quantity demanded and quantity supplied at this price?
(c) Calculate the shortage or surplus resulting from the price ceiling.
(d) Discuss the potential consequences of the price ceiling on the market.
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