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PROBLEM: Consider a competitive market characterized by the following supply and demand formulas: Demand: P =...

PROBLEM: Consider a competitive market characterized by the following supply and demand formulas: Demand: P = 105 - 0.25QD Supply: P = 0.275QS (a) Show the supply and demand curves and the equilibrium price and quantity in this market in a diagram. (b) With the aid of a diagram, carefully explain what would happen in this market if the government were to impose a price floor of $80 per unit in this market. As part of your answer, calculate the size of the deadweight loss associated with this price control. (Remember, the deadweight loss is approximated by the size of a triangle in you Supply and Demand diagram). (c) With the aid of a diagram, carefully explain what would happen in this market if the government were to impose a price ceiling of $30 per unit in this market. As part of your answer calculate the size of the deadweight loss associated with this price control. Please provide answer in details, showing each step with clarity for understanding purposes.

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Answer #1

Demand T= 105-0.25 So 20으보 a Eqilibrium Q is 20c 0: 275(200) -p 275 100 200 又qo.9 Price floor @g 一 -. Demand.. Ep 100 Su 3002So Supo ex-wile-only-sell-loo So, Price will be Ras eight lass (AARD) adwe aSS 2. = 2625 So when oxt impose tnan dlemand ill2. 2 169 16125 So when goyt impose price ceiling ap 30 tun demander cant buy 3oo hi

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