Question

Q. Given the following supply and demand functions, calculate consumer surplus.

P = 600 − Qd

P = 300 + 2QS

Q. Consider the market for jet fuel in a remote regional airport. The domestic demand and supply curves are given as (Qs are gallons in thousands):

P = 55 − 3QD

P = 5 + 7 QS

a) What is the market equilibrium price and quantity?

b) If the government imposes a price ceiling of $28, what will be the shortage of jet fuel at the airport?

c) What price floor would yield a surplus of 5,000 gallons of fuel?

Answer 1

At equilibrium , demand= supply 600 - Q = 300 + 20 300 = 3Q Q = 100 P= 300 + 2Cloo = Soo Consumer susphes = 0.5(600-500) 100 = sooo Market equilibrium 55-3Q = 5+7Q 5o= low Q=5 P-5 + 765) = 40 b) Pc = 28 28 = 55-300 Qo= 9 28=5 + 705 Qs = 3.28 Shortage = 9-3.28 - 5.71 Qs - Qo = 5ooo P-55-300 30o = 55-P Qo = 1 155 -P) Qs P=5+7Qs 7 Qs = 5-P - Qs = 3 (5-8) Q- Qo & I (3-P) - - (55-P) soo0 – 17.62 + 0.199 P= 26408.53