Here are the supply and demand equations for throstles, where p is the price in dollars:
D (p) = 40 − p
S (p) = 10+p.
On the axes below, draw the demand and supply curves for throstles, using blue ink.
(a) The equilibrium price of throstles is _______ and the equilibrium quantity is _______.
(b) Suppose that the government decides to restrict the industry to selling only 20 throstles. At what price would 20 throstles be demanded? _________. How many throstles would suppliers supply at that price? _______. At what price would the suppliers supply only 20 units? ______.
(c) The government wants to make sure that only 20 throstles are bought, but it doesn’t want the firms in the industry to receive more than the minimum price that it would take to have them supply 20 throstles. One way to do this is for the government to issue 20 ration coupons. Then in order to buy a throstle, a consumer would need to present a ration coupon along with the necessary amount of money to pay for the good. If the ration coupons were freely bought and sold on the open market, what would be the equilibrium price of these coupons?
(d) On the graph above, shade in the area that represents the deadweight loss from restricting the supply of throstles to 20. How much is this expressed in dollars? (Hint: What is the formula for the area of a triangle?)