Could you please help me to solve this problem with explanation? because I dont have any idea on my mind about how to solve it. Thank you very much.
4. The following is a summary of the CBS news article "New toll policy creates huge traffic jam," October 1, 2012. Please read this summary carefully and answer the questions below. . China government decided to abandon the use of tolls on roads during the eight- day "Golden Week" holiday for the Mid-Autumn Festival and National Day in year 2012. On the first day of the holiday, more than 85 million travelers took to the roads, about 10 million travelers more than on the first day of the holiday in 201 1. (In the Golden Week holiday 2011, the China government did not use such policy.) . Li Daokui, a renowned professor of Economics at Tsinghua University, criticized the toll-free policy in a micro blog post, calling it the most foolish in the world. He said that rising the tolls by 50 percent would have benefited people more. Assume that each traveler needs to pay the toll fee, 10 RMB, in usual days. The market demand for roads in usual days is P = 70 - Q The price is expressed in RMBs, and the quantities are expressed in million of travelers per day. Assume further that 1) any traveler requires to pay the toll fee only once, 2) any traveler who wants to use the road can use it (as long as he/she pays the toll fee), and 3) one road is enough for one travel. a. Draw a graph of the market, label the axes and the curves, and mark in the equilibrium price and quantity for usual days. Calculate the market equilibrium price and quantity. b. Suppose that the market demand for roads in Golden week is P = 85 - Q. Graphically demonstrate what happened to the demand curve and supply curve in 201 1 Golden week. Calculate the market equilibrium price and quantity. c. Graphically demonstrate the effect of government's new toll policy in 2012 Golden week. Calculate the market equilibrium price and quantity. d. Explain whether the change in 201 1 Golden week is a change in the quantity demanded or a change in demand. What about the change in 2012 Golden Week? . By taking the market equilibrium point in 201 1 Golden week and that in 2012 Golden week as an initial point and an end point respectively, calculate the price elasticity of demand. f. Suppose that each traveler needs to bear additional time costs when more travelers use the road simultaneously. The time cost for every million traveller is Q'/150 when there are Q million travelers on the road. Define NCS (Net Consumer Surplus) as a standard Consumer Surplus minus Total Time Cost. Calculate NCS for (1) usual days, (2) 201 1 Golden week, and (3) 2012 Golden week, and evaluate the new toll policy based on the NCS. Evaluate the policy suggested by Professor Li Daokui and discuss whether or not his claim is right
