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In: Economics

Consider the market for coffee beans in Nova Scotia. If p is the price of coffee...

  1. Consider the market for coffee beans in Nova Scotia. If p is the price of coffee beans and Q is the quantity of coffee beans, suppose that the demand and supply curves for coffee bears are given

Supply : QS = 10P - 200               Demand : QD = 250 – 2.5P.

  1. Determine the equilibrium price and quantity.
  2. Illustrate the equilibrium, consumer surplus (CS), producer surplus (PS), and total surplus (TS) on a diagram.
  3. Calculate the consumer surplus (CS), producer surplus (PS), and total surplus (TS) at the equilibrium.
  1. If the government imposes a price ceiling of $30 on the coffee bean market, graph the situation and clearly show the areas that correspond to CS, PS, and DWL on a new diagram.
  2. Calculate the consumer surplus (CS), producer surplus (PS), total surplus (TS), and dead weight loss (DWL), if the government imposes a price ceiling of $30.
  1. If the government imposes a price floor of $40 on the coffee bean market, graph the situation and clearly show the areas that correspond to CS, PS, and DWL on a new diagram.
  2. Calculate the consumer surplus (CS), producer surplus (PS), total surplus (TS), and dead weight loss (DWL), if the government imposes a price floor of $40.

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Expert Solution

Rahul Sunny answered 2 years ago
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