Suppose there is a competitive market with 30 consumers, each of which has a demand curve...

Suppose there is a competitive market with 30 consumers, each of which has a demand curve given by P = 20 – 10Q, and 30 suppliers, each of which has a supply curve given by P=10Q.

a. Derive equations for the aggregate demand and supply curves.

b. Find the market equilibrium price and quantity using your answer to part (a).

c. What are the net benefits (consumer plus producer surplus) of the market allocation in part (b)?

d. What would net benefits be if, instead of the market equilibrium quantity in part (b), a government regulation limited production of the good to 20 units?

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Expert Solution

Rahul Sunny answered 1 year ago

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