Question

In: Economics

The demand and supply for a good are respectively QD = 16 – 2P + 2I...

The demand and supply for a good are respectively QD = 16 – 2P + 2I and QS = 2P – 4 with QD denoting the quantity demanded, QS the quantity supplied, and P the price for the good. Suppose the consumers’ income is I = 2.

i) Determine consumers’ expenditures at the equilibrium. ii) Determine the consumer surplus at the equilibrium. iii) Determine consumers’ total benefits at the equilibrium. iv) Determine producers’ total revenues at the equilibrium.

Solutions

Expert Solution

Quantity demanded = 16 - 2P + 2I

I = 2

So, Quantity demanded = 16 - 2P + 4

= 20 -2P

Quantity supplied = 2P-4

At equilibrium, quantity demnded = quantity supplied

So, 20 - 2P = 2P-4

=> 24 = 4P

=> P=6

=> Q= 8

Consumer Surplus = 1/2 Base Height

= 1/2 8 2

= 8

Consumer's total benefits will be equal to their consumer surplus only as it is the difference between their willingness to pay and amount actually paid.

Producer surplus = 1/2 Base Height

= 1/2 8 4

= 16

Producer revenue = Quantity supplied Price

= 8 6

= 48


Related Solutions

The demand and supply for a good are respectively QD = 16 – 2P + 2I...
The demand and supply for a good are respectively QD = 16 – 2P + 2I and QS = 2P – 4 with QD denoting the quantity demanded, QS the quantity supplied, and P the price for the good. Suppose the consumers’ income is I = 2. i) Determine producers’ total cost (there are no fixed costs) at the equilibrium. ii)Determine the producer surplus at the equilibrium. iii)) Determine the total surplus at the equilibrium..
The demand and supply for a good are respectively QD = 16 – 2P + 2I...
The demand and supply for a good are respectively QD = 16 – 2P + 2I and QS = 2P – 4 with QD denoting the quantity demanded, QS the quantity supplied, and P the price for the good. Suppose the consumers’ income is I = 2 i)Determine the price-elasticity of demand if P = 2. ii)Determine the income-elasticity of demand if P = 2. iii)Determine the price-elasticity of supply if P = 4. iv)) Determine consumers’ expenditures at the...
The supply and demand functions for a good are respectively QS = 2P – 4 and...
The supply and demand functions for a good are respectively QS = 2P – 4 and QD = 60 – 2P + 2I, with I representing income, P the market price, QS the quantity supplied, and QD the quantity demanded. a) If I = 18, determine i) The equilibrium price; ii) The equilibrium quantity. b) Suppose the income increases to I = 22. Determine i) The quantity demanded at the initial equilibrium price; ii) The equilibrium price; iii) The equilibrium...
The demand and supply for a good are respectively QD = 80 – 5P and QS...
The demand and supply for a good are respectively QD = 80 – 5P and QS = - 40 + 20P. 1) Determine the equilibrium price. 2) Determine the equilibrium quantity. Suppose the government imposes a unit tax of 1.5 on producers. 3) Determine the price paid by consumers. 4) Determine the size of the tax that is supported by consumers. 5) Determine the price received by producers. 6) Determine the size of the tax that is supported by producers....
7) The supply and demand functions for a good are respectively QS = 2P – 4...
7) The supply and demand functions for a good are respectively QS = 2P – 4 and QD = 60 – 2P + 2I, with I representing income, P the market price, QS the quantity supplied, and QD the quantity demanded. a) If I = 18, determine i) The equilibrium price; ii) The equilibrium quantity. b) Suppose the income increases to I = 22. Determine i) The quantity demanded at the initial equilibrium price; ii) The equilibrium price; iii) The...
QD=40-2P and QS=P-8 represent market demand and supply functions for a good. If each unit of...
QD=40-2P and QS=P-8 represent market demand and supply functions for a good. If each unit of the good produced involves external costs of $4 (i.e. MEC=4), then (a) what amount of good is produced in the market equilibrium? (b) What are marginal social benefits(MSB) and marginal social costs (MSC) at the market equilibrium quantity?
2. Supply, Demand and Elasticity: The demand for a product is Qd=200-5P-2Px and supply is Qs=10+2P,...
2. Supply, Demand and Elasticity: The demand for a product is Qd=200-5P-2Px and supply is Qs=10+2P, where Q is the quantity of the product, in thousands of units, P is the price of the product, and Px is the price of another good X. A. When Px = $25, what is the equilibrium price and quantity sold of the product? B. At the equilibrium price and quantity, what is the own price elasticity of demand for the product? C. What...
Market demand is given as QD = 50 – 2P. Market supply is given as QS...
Market demand is given as QD = 50 – 2P. Market supply is given as QS = 3P + 10. Each identical firm has MC = 2.5Q and ATC = 2Q.   a. What quantity of output will a single firm produce? What is the price? b. Calculate each firm’s profit? What will happen to it in the long-run? Explain the process. c. Draw the individual demand, MR, supply and ATC curves. Show profit in the diagram
Suppose the demand function for corn is Qd = 10-2p, and supply function is Qs =...
Suppose the demand function for corn is Qd = 10-2p, and supply function is Qs = 3p-5. The government is concerned that the market equilibrium price of corn is too low and would like to implement a price support policy to protect the farmers. By implementing the price support policy, the government sets a support price and purchases the extra supply at the support price and then gives it away to the consumers free. The government sets the support price...
Suppose demand and supply can be characterized by the following equations: Qd = 6 – 2P...
Suppose demand and supply can be characterized by the following equations: Qd = 6 – 2P Qs = P Price is in dollars; quantity is in widgets. For parts (c) and (d), assume a tax of $1.50 per widget sold is imposed on sellers. Show your work for each step below. C. Find the equilibrium price buyers pay, price sellers get, and quantity algebraically. D. Calculate the following: consumer surplus producer surplus total firm revenue production costs total tax revenue...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT