Question
Consider the following supply and demand functions q D = 12 - 3 p q S = -3 + 2 p Using the supply and
Consider the following supply and demand functions
qD = 12 - 3p
qS = -3 + 2p
Using the supply and demand functions, suppose a price ceiling of p = 2 were implemented.
- How much is supplied to the market and how much is demanded?
- What is the excess demand?
- Calculate the consumer surplus, producer surplus, and welfare level without the priceceiling.
- Calculate the consumer surplus, producer surplus, welfare level, and dead weight loss withthis price ceiling.
- What if the price ceiling were p =4? How would our results change?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To analyze the effects of a price ceiling on the market lets first find the equilibrium price and quantity without any price ceiling Equilibrium occurs when quantity demanded qD is equal to quantity s...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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Get StartedRecommended Textbook for
Modern Principles of Economics
Authors: Tyler Cowen, Alex Tabarrok
3rd edition
1429278390, 978-1429278416, 1429278412, 978-1429278393
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