In: Economics
2Q
Consider a closed economy. Let the demand curve be P = 80 - Q and the supply
curve be P = 20 + 2Q .
a) Calculate the equilibrium price and equilibrium quantity.
b) Suppose the government sets a price ceiling of $55, what is the amount of excess demand or excess supply? (Write down excess demand or excess supply).
c) Suppose the government sets a production quota of 16 units, calculate the equilibrium price and equilibrium quantity.
2. Consider a closed economy. Let the demand curve be P = 80 - Q and the supply
curve be P = 20 + 2Q .
a) Suppose the government imposes an unit tax of $3/unit, calculate Q’, Pc, Ps and the tax
revenue
i) assuming the tax is imposed on the consumers
ii) assuming the tax is imposed on the producers.