Question

The graph shows the market for tutoring in economics at a university. A graph plots demand and supply curves with Quantity (hours of tutoring per week) along the horizontal axis and Price (per hour of tutoring) along the vertical axis. The supply curve starts at 2.50 dollars on price and has a positive slope. The demand curve starts at 25 dollars on price and has a steep negative slope. The curves intersect at 300 hours on quantity, 10 dollars on price. The other points marked on the supply curve are: 7.50 dollars for 200 hours of tutoring per week; 20 dollars for 700 hours of tutoring per week and 25 dollars for 900 hours of tutoring per week. If a quota is established at 100 hours, the deadweight loss is, in numerals, $_____.

Answer 1

The slope of of demand curve=∆p/∆Q

At p=0 ,Qd=300

At p=25, qd=0

Slope=-25/300=-1/12

Price of demand at Q=100

∆P/∆q=-1/12

∆p=100/12=-25/3

P=25-25/3=50/3

Slope of supply curve=∆p/∆q=7.5/300=0.025

Price of supply at q=100

∆p=0.025*100=2.5

P=2.5+2.5=5

Deadweight loss=1/2*(300-100)*(50/3-2.5)=100*(16.66-2.5)=100*14.16=1416