Consider a firm that produces a wide range of cookies. This firm has estimated demand and supply for one of its most popular products: chocolate cookies.

Qdb=5Pb+4Pm+0,5R Qob=10+3Pb

Where Qdb is the quantity demanded of chocolate biscuits, Pb : the price of chocolate cookies (expressed in $), Pm: the price of the muffins (expressed in $), ,R: income (expressed in $) and Qoy: the offered quantity of chocolate biscuits.

Question 1:

Represent this chocolate cookie market graphically. (3 points) In your graph, identify the equilibrium, consumer surplus and producer surplus. (3 points)

Question 2:

Calculate consumer surplus, producer surplus, and total surplus at market equilibrium. Indicate your calculations.

Question 3:

If the government decides to put a price cap equal to $2 on the chocolate cookie market, how many units will be traded in the market? Indicate your calculations.

Question 4:

Illustrate graphically the impact of this ceiling price on overall welfare. (4 dots)