Question

9) The demand function is Qd = 180-2p and sappy function is Os = 5+0.5p. Calculate the price elasticity of dement and supply. Calculate also the consumer surplus and producer surplus ?

14)Refer to question no 9. If the Government arbitrarily set the price $80, Calculate fictional gain or loss of the industry. Calculate also the death weight loss, consumer surplus and producer surplus ?

15)Refer to question no 9. If the government arbitrarily set the price $60, Calculate the fiction gain or loss of the industry. Calculate also the death weight loss, consumer surplus and producer surplus ?

Answer 1

9)

P	Qd	Qs	Ped	Pes
0	180	5
5	170	7.5
10	160	10	-0.06	-5.67
15	150	12.5	-0.13	-4.00
20	140	15	-0.20	-3.00
25	130	17.5	-0.29	-2.33
30	120	20	-0.38	-1.86
35	110	22.5	-0.50	-1.50
40	100	25	-0.64	-1.22
45	90	27.5	-0.80	-1.00
50	80	30	-1.00	-0.82
55	70	32.5	-1.25	-0.67
60	60	35	-1.57	-0.54
65	50	37.5	-2.00	-0.43
70	40	40	-2.60	-0.33
75	30	42.5	-3.50	-0.25
80	20	45	-5.00	-0.18
85	10	47.5	-8.00	-0.11
90	0	50	-17.00	-0.05

CS = 0.5*20*40 = 400
PS = 5*70+0.5*70*35 = 1575
TS = 1975

14)

Gain = Supplied-demand = 45-20=25
CS = 0.5*10*20 = 100
PS = 1375
DWL =0.5*20*50= 500

15)

Loss = Supplied-demand = 35-60=-25
CS = 0.5*(90-72.5)*35+12.5*35 = 743.75
PS = 5*60+0.5*60*30 = 1200
DWL =0.5*12.5*5 = 31.25