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In: Economics

Suppose the market demand for broccoli is given by Demand: Q = 1000 – 5P Where...

Suppose the market demand for broccoli is given by

Demand: Q = 1000 – 5P

Where Q is quantity measured in 100s of bushels and P is price per hundred bushels. The market supply is given by

Supply: Q = 4P – 80

  1. What is the equilibrium price and quantity? How much is spent on broccoli? What is consumer and producer surplus?
  2. Describe the impact of a $150 per hundred bushel price floor on broccoli. (How many bushels would be sold? What is consumer and producer surplus? What is the welfare loss compared to (a)?)
  3. Suppose the government instituted a $45-per-hundred-bushel tax on broccoli. How would the tax affect the equilibrium? How would the tax burden be shared by producers and consumers? What is consumer and producer surplus? How much tax revenue is raised? What is the welfare loss compared to (a)?

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Expert Solution

Rahul Sunny answered 1 year ago
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