1. Analysts predicted that WITHOUT REGULATION, quantity of eggs offered in cage-free market would grow from 460.4 million dozen to 1005.2 million dozen between 2016 and 2022. Simultaneously, the price increase in this market predicted to grow from $3.16 to 3.78. The quantity of eggs in the organic market would grow from 325.8 million dozen to 667.6 million dozen over the same period, with a price increase from $3.93 to $4.50. What role do these predictions play in the CBA?
2. Write out the calculation for the change in consumer surplus in the organic egg market when the price elasticity of demand is assumed to be -1 (the third line in the table). Hints: To calculate the change in price, you can use the formula for price elasticity of demand: Ed = (p*/q*)(dq/dp). You have all the information except dp, which you can solve for. Then you can calculate the change in CS using equation (3.2) on p. 57 or (3.4) on p. 59 in the text. It is important to remember that X* and p* are initial (pre-policy) equilibrium quantity and price.

Instructions