Question

In: Economics

The demand function for a good is Q=1200-P while the supply functions is Q=-200+P. World price...

The demand function for a good is Q=1200-P while the supply functions is Q=-200+P. World price is $300 and the nation is is imposing a quota of 200 units.

a. Graph the demand and supply function to scale and label axis and intercepts.

b. Determine the quantity demanded before and after the quota.

c. Determine the quantity supplied before and after the quota.

d. Determine the quantity imported before and after the quota.

e. Determine the consumer surplus before and after the quota.

f. Determine the producer surplus before and after the quota.

g. Determine government cost of the quota.

h. Determine the dead weight loss.

i. Identify on the graph in part (a) the dead weight loss.

Solutions

Expert Solution

a) The given demand function

Q= 1200-P

Quantity demanded when price is zeo = 1200. This is the x axis intercept

Price when quantity demanded is zero = 1200. This is the y axis intercept.

(0 = 1200-P

P = 1200 )

The given supply function is

Q = -200+P

Quantity supplied when price is zero= -200

Price when quantity supplied is zero= 200

The given supply and demand function can be drawn as follows

In the diagram x and y axis represents quantity and price respectively. S is the supply curve and D is the demand curve. Initially the world price is 300.

b) Quantity demanded before quota(world price 300) = 900

Q = 1200-300= 900

Import demand = domestic demand-domestic supply

Import demand = (1200-P) - (-200+P, )

Import demand = 1400+2P

Import quota of 200 means import demand is 200.

When import demand is 200

200 = 1400+2P

2P = 1400-200=1200

P = 1200/2 = 600

New Price with import quota of 200 = 600

When price is 600, domestic demand is

Q = 1200-600= 600

Quantity demanded before quota = 900

Quantity demanded after quota= 600

This has represented in the above graph

c) Quantity supplied before quota

Q = -200+300 =100

With quota of 200, price increase to 600(calculated in part b)

Quantity supplied after quota

Q= -200+600 =400

Quantity supplied before quota= 100

Quantity supplied after quota= 400

d) import = Domestic demand -domestic supply

Before quota, demand = 900, supply= 100

Import= 900-100 =800

After quota, demand = 600, supply= 400

Import = 600-400 =200

Import before quota= 800

Import after quota =200

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

Assume that domestic demand function for oil is Q=200-P and the domestic supply function is Q=-20+P....
Assume that domestic demand function for oil is Q=200-P and the domestic supply function is Q=-20+P. Calculate the perfectly competitive equilibrium quantity and price. Calculate the consumer surpluss and the producer surpluss at perfect competition. The country opens up for trade and the world price for oil is only $50. How much oil will be imported? Calculate the consumer and producer surpluss and deadweight loss/gain (compared to no trade) under free trade. Assume that the government imposes $10 per unit...
Assume that domestic demand function for oil is Q=200-P and the domestic supply function is Q=-20+P....
Assume that domestic demand function for oil is Q=200-P and the domestic supply function is Q=-20+P. Calculate the perfectly competitive equilibrium quantity and price. Calculate the consumer surpluss and the producer surpluss at perfect competition. The country opens up for trade and the world price for oil is only $50. How much oil will be imported? Calculate the consumer and producer surpluss and deadweight loss/gain (compared to no trade) under free trade. Assume that the government imposes $10 per unit...
Suppose the inverse demand and inverse supply functions for a good are given as P= 200-0.5Q...
Suppose the inverse demand and inverse supply functions for a good are given as P= 200-0.5Q and    P= 20 + 0.5 Q.    Calculate the initial equilibrium price and quantity. Draw the above inverse demand and inverse supply functions. Suppose a per unit tax of $10.00 was levied on sellers. Determine graphically and algebraically the effect of the tax on the price paid by demanders, the price received by sellers, the total tax paid, and the fraction of the tax paid...
Demand function is: Q = 16 – p. Supply function is: Q = -4 + p....
Demand function is: Q = 16 – p. Supply function is: Q = -4 + p. (Show me your math) a) What is the quantity demanded and quantity supplied at price 6? Is there an excess demand or supply? b) What is the equilibrium price and quantity?
Supply: p= q Demand: p= 200-q 25.The government enacts a price ceiling of $120. What is...
Supply: p= q Demand: p= 200-q 25.The government enacts a price ceiling of $120. What is the new Consumer Surplus? A)$10,000 (B)$1,000 (C)$2,225 (D)None of the above 26.Assume now that the government enacts a price ceiling of $20. What is the new consumer Surplus?    A)$3,200 (B)$3,400 (C)$312.50 (D)$6,400 27.When the price ceiling is $20, consumer surplus declines, compared to the marketequilibrium. Why? (A)The lower prices do not overcome reduced quantity (B)The lower quantity does compensate for higher prices (C)Both...
a. Suppose the demand function P = 10 - Q, and the supply function is: P...
a. Suppose the demand function P = 10 - Q, and the supply function is: P = Q, where P is price and Q is quantity. Calculate the equilibrium price and quantity. b. Suppose government imposes per unit tax of $2 on consumers. The new demand function becomes: P = 8 – Q, while the supply function remains: P = Q. Calculate the new equilibrium price and quantity. c. Based on (b), calculate the consumer surplus, producer surplus, tax revenue,...
Suppose the demand function P = 10 - Q, and the supply function is: P =...
Suppose the demand function P = 10 - Q, and the supply function is: P = Q, where P is price and Q is quantity. Calculate the equilibrium price and quantity. b.Suppose government imposes per unit tax of $2 on consumers. The new demand function becomes: P = 8 – Q, while the supply function remains: P = Q. Calculate the new equilibrium price and quantity. c.Based on (b), calculate the consumer surplus, producer surplus, tax revenue and the deadweight...
Given the following supply and demand equations, solve the following supply: p=q Demand: p=200-p a) What...
Given the following supply and demand equations, solve the following supply: p=q Demand: p=200-p a) What is the market equilibrium price and quantity? b) What is the Consumer surplus and the producer surplus? c) The government enacts a price ceiling of $120. What is the new consumer surplus? d) Assume now the government enacts a price ceiling of $20. What is the new consumer surplus? e) When the price ceiling is $20, consumer surplus declines, compared to the market equilibrium....
Supply Demand MC = P = 20 + 0.5Q MB = P = 200 – Q...
Supply Demand MC = P = 20 + 0.5Q MB = P = 200 – Q 6. Suppose the government observes the market described above and passes a rule that production in the industry cannot exceed 100 units. This would be an example of what type of policy approach? 7. Suppose instead the government decided to charge an emissions fee of $20. Why might policymakers prefer a fee over a simple decree that production cannot exceed 100 units? 8. Suppose...
Consider a market for a good characterized by an inverse market demand P(Q) = 200−Q. There...
Consider a market for a good characterized by an inverse market demand P(Q) = 200−Q. There are two firms, firm 1 and firm 2, which produce a homogeneous output with a cost function C(q) =q2+ 2q+ 10. 1. What are the profits that each firm makes in this market? 2. Suppose an advertising consultant approaches firm 1 and offers to increase consumers’ value for the good by $10. He offers this in exchange for payment of $200. Should the firm...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT