A market is described by the following supply and demand curves: Q P Q P S D
Question:
A market is described by the following supply and demand curves:
Q P Q P S
D 2
300 5
5 2
a. Solve for the equilibrium price and quantity.
b. If the government imposes a price ceiling of $90, does a shortage or surplus (or neither) develop?
What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus?
c. If the government imposes a price floor of $90, does a shortage or surplus (or neither) develop?
What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus?
d. Instead of a price control, the government levies a tax on producers of $30. As a result, the new supply curve is:
QS 5 2(P 2 30).
Does a shortage or surplus (or neither) develop?
What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus?
Step by Step Answer: