Chapter 5, Problem 9P

To determine

(a) Equilibrium price and equilibrium quantity.
(b) Demand price when quota is fixed at 80,000 pounds
(c) Supply price when quota is fixed at 80,000 pounds.
(d) Quota rent and the deadweight loss.
(e) Transaction that benefits both buyer and seller.

Concept Introduction

Equilibrium Price: The equilibrium price is the market price at which the quantity demanded by the consumers equals the quantity supplied by the producers.

Equilibrium Quantity: The equilibrium quantity is that quantity where the demand and supply of a product or service is equal.

Quantity Control or Quota: The government intervenes by specifying a limit of quantity that can be bought or sold in the market. The quantity of goods or services that can be bought or sold under such systems is known as quota limit.

Deadweight Loss: Deadweight loss is a situation when there is loss suffered due to inefficiency in the market, when the equilibrium point is not achieved.