Suppose the demand and supply curves for units of university credits are given by the following...

Suppose the demand and supply curves for units of university credits are given by the following equations: Q D = 5400 − 2P Q S = 3P − 400 where QD is the quantity of credits demanded, QS is the quantity supplied, and P is the price charged for each unit in dollars. (a) (3 points) What is the free-market equilibrium Price and Quantity. (b) (3 points) Suppose that the government wants to make education more accessible and therefore passes a regulation that says no university can charge more than $800 per credit. What is the new equilibrium Price and Quantity? (c) (4 points) Calculate the shortage or surplus generated by this government policy. Show it on graph. Include your answers from part (a) and (b) on the graph.

Expert Solution

Rahul Sunny answered 1 year ago

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