Applications of Supply and Demand Problem Set1 1. The graph below shows the supply and demand curves for burritos. Suppose that the government imposes a Price Ceiling equal to $5. _ _______ EHLCECEI'ENB_ _ Price of Burritos (5} I I I l I I | Cl 1 2 3 4 5 (J 7' 3 9 10111213 Quantity of Burritos Will this result in a binding or non-binding price ceiling? Use the following information to answer questions 2 through 7: The graph below shows the supply and demand curves for soda. 13 12 11 Price Floor Price of Soda {5) | I I I I U 1 2 3 4 5 ('3 1" a 9 10 1 1 12 13 Quantity of Sada 2. First consider a situation without any government interventions and no price controls. In that case, what is the equilibrium quantity? 3. What is the equilibrium price? 4. Now suppose that the government imposes a Price Floor equal to $8. As a result of this new policy, what is the quantity demanded? 5. What is the new quantity supplied? 6. As a result of this Price Floor, is there shortage or surplus, or is the price control non-binding? 7. What is the amount of the shortage or surplus? Use the following information to answer questions 8 through 10: The graph below shows the supply and demand curves for pizza rolls. 12 Demand Price of pizza rolls {$l 'HI | 1 Supply 012345678910111213 Quantity of pizza rolls 8. What is the size of consumer surplus? 9. What is the size of producer surplus? 10. What is the size of social (total) surplus? Use the following information to answer questions 11 through 14: The graph below shows the supply and demand curves for beer. Suppose that the government imposes a Price Ceiling of 4. 13- 12 11- 10 Price of beer (5) 4 __ Price Ceiling 11111 111 012345678910111213 Quantity of beer 11. What is the size of consumer surplus? 12. What is the size of producer surplus? 13. What is the size of deadweight loss? 14. What is the size of social (total) surplus? Use the following information to answer questions 15 through 23: Use the graph below to answer the following questions. _\\ M | _\\ _' | O O I Price Ceii'ing Price of pizza rolls {$l "h-J I | i - | | | | I 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of pizza rolls 15. What is the size of consumer surplus when there is no government price control? 16. What is the size of producer surplus when there is no government price control? 17. What is the size of social surplus when there is no government price control? 18. What is the size of deadweight loss when there is no government price control? 19. What is the size of consumer surplus when a price ceiling of $5 is imposed? 20. What is the size of producer surplus when a price ceiling of $5 is imposed? 21. What is the size of deadweight loss from a price ceiling of $5? 22. What is the size of social surplus when a price ceiling of $5 is imposed? 23. What is the difference between total surplus before and after price control is imposed? How does this number compare to the deadweight loss? Use the following information to answer questions 24 through 32: The graph below shows the supply and demand curves for beer. H Price Fioor Price of beer ($1 | | | 1 | | : 0 40 50 60 70 80 90100110120 Quantity of beer | | 0 10 20 3 24. What is the size of consumer surplus when there is no government price control? 25. What is the size of producer surplus when there is no government price control? 26. What is the size of social surplus when there is no government price control? What is the size of deadweight loss when there is no government price control? 27. What is the size of consumer surplus when Price Floor of $9 is imposed? 28. What is the size of producer surplus when Price Floor of $9 is imposed? 29. What is the size of deadweight loss from Price Floor of $9? 30. What is the size of social surplus when Price Floor of $9 is imposed? 31. What is the difference between total surplus before and after price control is imposed?