Question

Supply and Demand dari bensin di Indonesia mempunya persamaan: QS = 20,000 + 0.73 P

QD= 37,000 – 1.75P

a. Buat kurva Supply and Demand dari bensin di Indonesia

b. Tentukan Quantity dan Price dari market clearing?

c. Hitung net loss of total (deadweight loss), jika pemerintah menetapkan ceiling price

dari bensin Rp 5,000. Dengan penetapan ceiling price, producer atau consumen yang kondisinya lebih baik. Jelaskan alasan jawaban tersebut.

The supply and demand of gasoline in Indonesia has an equation: QS = 20,000 + 0.73 P

QD = 37,000 - 1.75P

a. Create a Supply and Demand curve from gasoline in Indonesia

b. Determine the Quantity and Price of the market clearing?

c. Calculate net loss of total (deadweight loss), if the government sets a ceiling price

from gasoline Rp. 5,000. By setting ceiling prices, producers or consumers whose conditions are better. Explain the reason for the answer.

Answer 1

a.

b. at the equilibrium level of quantity and price, Qs=Qd or 20000+0.73P=37000-1.75P

or, 1.75P+0.73P=17000

or, P=6854.84

and Q*=25004.03226

c. Inverse demand function, P=21142.86-0.57Q

inverse supply function, P=-27397.26+1.37Q

hence at market-clearing level,

consumer surplus==14288.02xQ-0.285xQ2=14288.02x25004.03-0.285x25004.032=179075648.6

producers surplus==34252.1Q-0.685xQ2=428177497.3

total surplus=607253145.9

after price ceiling P=5000

total quantity available will be=20000+0.73x5000=23650

hence

consumer surplus will be==16142.86Q-0.285Q2=222371726.5

producer surplus will be==32397.26Q-0.685Q2=383059286.5

total social welfare=605431013

we can see that after the price ceiling the consumer surplus is more hence consumers are better off. because consumer surplus is more after the price ceiling.

it is due to the low price. before they had to pay 6854.84 now they are paying less. but there is a decline in the quantity sold also hence there is some consumer welfare loss too. but the net effect is still positive for the consumers.

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