Question
In: Economics
Let the following be the supply and demand for coconuts. P 2 3 4 5 6...
Let the following be the supply and demand for coconuts.
P 2 3 4 5 6 7 8 9 10 11 12
Qs 100 200 300 400 500 600 700 800 900 1000 1100
QD 550 500 450 400 350 300 250 200 150 100 50
Now imagine that there is a price ceiling on coconuts at $3
but in order to prevent wasting peoples' time by making them wait
in line, the government hands out ration coupons to people. In
order to buy a coconut you need a coupon. Assume that the number of
coupons is the appropriate number to clear the market with the
price ceiling (you should know what that is). Now notice that the
government probably doesn't know who has the highest marginal value
for coconuts so, while this will eliminate the waste from the line
it will most likely not allocate the coconuts efficiently. However,
we can solve this problem by allowing people to trade the coupons!
So imagine that there is such a market and it is perfectly
competitive.
a. What will the price of a coupon be in this market?
b. Draw the price ceiling graph and identify the consumer and
producer surplus, and the dead weight loss. There should be an area
in there which would have been the cost of the line had there been
a line. Label this area "A." Who gets this surplus now?
Solutions
Expert Solution
As per the given information, demand = supply for price $5. At
this price, the QD = QS = 400.
Now as government imposes price ceiling, the price will drop to the
ceiling if it is below equilibrium. Ceiling is $3. Equilibrium
price is $5. Hence price will decrease to $3. This can be shown as
follows:
Here the equilibrium quantity is 400 units and price is $5. The
green line shows the price ceiling. Hence price will drop to $3.
From the table we can see, at this price, QD = 500 and Qs =
200.
Hence there arises a shortage of supply by 300 units.
a) To avoid crowd, government decides to distribute coupon. The price of coupon will be $3, equal to the ceiling.
b) The required areas are as follows :
The yellow area is the consumer surplus after price ceiling.
(increases)
Gray area is producer surplus after ceiling. (decreases)
Red area is deadweight loss.
Since the price has decreased due to ceiling, this area goes to the
consumer in terms of increase in consumer surplus. (marked pink and
A)
Rahul Sunny answered 2 years agoRelated Solutions
Let the following be the supply and demand for coconuts. P 2 3
Let the following be the supply and demand for coconuts.
P
2
3
4
5 6
7
8
9
10
11
12
Qs 100
200 300
400
500 600 700
800 900
1000 1100
QD 550
500 450
400
350 300 250
200 150
100 50
Now...
1. Here is the demand for coconuts: P 3 4 5 
1. Here is the demand for coconuts:
P
3
4
5
6
7
8
9
10
11
12
13
QD
1100
1000
900 800
700 600
500
400
300
200 100
And here is supply
P
3
4
5
6
7
8
9
10 11
12 13
QS
100
200
300
400
500
600
700
800
900
1000 1100
Identify the equilibrium price, quantity, consumer and producer
surplus and...
1. Here is the demand for coconuts: P 3 4 5 &n
1. Here is the demand for coconuts:
P
3 4
5 6 7 8 9 10 11
12 13
QD
1100
1000
900 800
700 600
500
400
300
200 100
And here is supply
P
3
4
5
6
7
8
9 10
11
12
13
QS
100
200
300
400
500
600
700
800
900
1000 1100
Identify the equilibrium price, quantity, consumer and producer
surplus and show them on a graph. The graph should be pretty simple
here, the main issue...
6. Let A = {1, 2, 3, 4} and B = {5, 6, 7}. Let f...
6. Let A = {1, 2, 3, 4} and B = {5, 6, 7}. Let f = {(1, 5),(2,
5),(3, 6),(x, y)} where x ∈ A and y ∈ B are to be determined by
you. (a) In how many ways can you pick x ∈ A and y ∈ B such that f
is not a function? (b) In how many ways can you pick x ∈ A and y ∈
B such that f : A → B...
Let X = {1, 2, 3, 4, 5, 6} and let ∼ be given by {(1,...
Let X = {1, 2, 3, 4, 5, 6} and let ∼ be given by {(1, 1),(2,
2),(3, 3),(4, 4),(5, 5),(6, 6),(1, 3),(1, 5),(2, 4),(3, 1),(3, 5),
(4, 2),(5, 1),(5, 3)}.
Is ∼ an equivalence relation? If yes, write down X/ ∼ .
Supply and Demand Use the following equations: (1) P = 4 + Q (2) P =...
Supply and Demand Use the following equations: (1) P = 4 + Q (2)
P = 12 – 3Q a.
Please show steps:
a. Which equation represents the supply curve, and which
represents the demand curve? How do you know?
b. What is the equilibrium price and quantity in this
market?
c. Graph the supply and demand curves for these equations.
d. Suppose the price is $8. What is the new Qs and Qd? What type
of disequilibrium situation exists,...
[4 5 5 2 4 4 6 3 3 7 5 3 6 3 4 4...
[4 5 5 2 4 4 6 3 3 7 5 3 6 3 4 4 6 5 4 5 3 7 5 5 4 2 6 5 6
6]
This is my dataset
Find mean, median, mode, variance, standard deviation,
coefficient of variation, range, 70th percentile,
3rdquartile of the data and skewness and define what
each of these statistics measure. For example, mean is a measure of
the central tendency, what about the rest?
Use Chebyshev’s rule to find...
[4 5 5 2 4 4 6 3 3 7 5 3 6 3 4 4...
[4 5 5 2 4 4 6 3 3 7 5 3 6 3 4 4 6 5 4 5 3 7 5 5 4 2 6 5 6
6]
This is my dataset
Split the dataset in two equal parts. You have 30 datavalues.
If you split the data in two equal parts each part will contain 15
data values. Call the first part Y and second part
X.Draw scatter plot of the 2 datasets, X being on the horizontal...
5. (a) Let σ = (1 2 3 4 5 6) in S6. Show that G...
5.
(a) Let σ = (1 2 3 4 5 6) in S6. Show that G = {ε, σ, σ^2, σ^3,
σ^4, σ^5} is a group using the operation of S6. Is G abelian? How
many elements τ of G satisfy τ^2 = ε? τ^3 = ε? ε is the identity
permutation.
(b) Show that (1 2) is not a product of 3-cycles. Must be
written as a proof!
(c) If a^4 = 1 and ab = b(a^2) in a...
Let S = {1, 2, 3, 4, 5, 6, 7} be a sample of an experiment...
Let S = {1, 2, 3, 4, 5, 6, 7} be a sample of an experiment and
let X = {1, 4, 7}, Y = {2, 3, 5}, and Z = {1, 3, 5} be events.
Which of the following statements is correct?
a) X and S are mutually exclusive events.
b) X and Y are mutually exclusive events.
c) X, Y, and Z are mutually exclusive events.
d) Z and Y are mutually exclusive events.
e) X and Z...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Consider a buffer system consisting of Benzoic acid (pKa = 4.20) and sodium benzoate, a) Would...
- Decision Variables S T Minimize 1.8S + 2.20T Subject to: Potassium 5S + 8T >= 200...
- A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,...
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
ADVERTISEMENT