Question

d) Canada is a “small” country in the global market for strawberries since its production or consumption levels do not affect world price. The world price for strawberries is $10 per box. If trade is allowed, calculate producer surplus, consumer surplus and total surplus for strawberries in Canada?

Q_D = 600 – 20P

Q_S = -150 + 30P

Answer 1

Qd = 600-20p

When Qd=0 then,

p = 30

Qs = -150+30P

when Qs=0 then,

P = 5

For equilibrium price and quantity

QD = Qs

600 -20P = -150 + 30P

750 = 50 P

Pe = 15

world P = 10

equilibrium quantity = 600 - 20(15)

Qe = 300

equilibrium price = 15

Now the world price is 10 which is less than price on canada so this is a case of price ceiling

Qd at price 10 will be

Qd = 600 - 200

Qd at price 10 = 400

Qs at price 10

Qs = -150 + 300

Qs at price 10 = 150

As after being world price 10 demand will be more than supply so the shortage of quantity in the market is 400-150 = 250

At 150 the price for Qd will be

150 = 600 -20p

p = 22.5

now please look at the image for further solution