Q2: A market consists of 10 buyers, each of whom is willing to purchase 1 unit of the product in the market, and 10 sellers, each of whom has potentially 1 unit of the product to sell.The highest price that each of the 10 buyers is willing to pay (ie the demand value or V_D) are: $56, $54, $50, $48, $42, $36, $32, $30, $24, and $22 (shown in order from highest to lowest). The lowest price that each of the 10 seller is willing to accept (ie the supply value or V_S) are: $18, $24, $28, $30, $32, $36, $40, $42, $48 and $54 (shown in order from lowest to highest).

Note: Unlike the previous question, which specifies demand and supply equations and asks you to find the demand value (V_D) and supply value (V_S), this question tells you V_D and V_S (and from which you can draw a demand curve and a supply curve).

a)What are the equilibrium price and the equilibrium quantity in this market? a graph would be useful to determine the equilibrium in this market.

b) Why is the buyer who is willing to pay at most $30 for the product not going to purchase the product?

c) What does consumer surplus equal when the market is at equilibrium?

d) What does producer surplus equal when the market is at equilibrium?

e) What does total economic surplus equal when the market is at equilibrium?

f) Suppose the government required sellers to produce and sell exactly 10 units of the product (which is more than the market would choose to produce). What does total economic surplus equal? Hint: Read Chapter 5 Note on How to Calculate the Consumer Surplus, Producer Surplus & Total Economic Surplus.

g) Suppose the highest price that EVERY one of the 10 buyers is willing to pay (ie V_D) decreases by $4 due to a change in tastes. For example, instead of being willing to pay $56, one buyer is now willing to pay only $52 for the product. What are the new equilibrium price and equilibrium quantity in this market? Hint: The equilibrium price is no longer an exact value; it is a range.