Question
The demand and supply equations for a product are given as P = 80 - 0.5Q and P = 20 + 0.5Q, respectively, where P
The demand and supply equations for a product are given as P = 80 - 0.5Q and P = 20 + 0.5Q, respectively, where P is the price in dollars and Q is the quantity. Solve for the market equilibrium price and quantity. If the government imposes a price ceiling at $30, calculate the quantity traded, the consumer surplus and the producer surplus in the market. Support your answers with a suitable market diagram. Appraise whether the market is efficient, compute the deadweight loss (if any) and explain whether this price ceiling benefits the consumers.
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