Question

Question 4 Tries remaining: 2 government imposes a a price ceiling of $68 Points out of 7.70 Calculate the dollar amount of consumer surplus from the price ceiling. The demand for wheat is given by: Q- 186-0.4P. The supply of wheat is given by: Qs- 3P -120. Suppose the Flag question (Do not include a $ sign in your response. Round to the nearest two decimal places if necessary.) Answer: Check

Answer 1

Given, $\large Q_D = 186 -0.4P$

And $\large Q_S = 3P - 120$

First of all determine the equilibrium price and quantity by equating quantity demanded with quantity supplied

$\large 186 - 0.4P = 3P - 120$

Solving for P we get

186 + 120 = 3P + 0.4P

3.4P = 306

$\large P = \frac{306}{3.4}$

P_E = $ 90 per unit

Q_E = 150 units (=186-0.4*90)

When government imposes a price ceiling of $68

Then quantity demanded will be

Q_C = 186 -0.4*68 = 158.8 units

When price is 68 Quantity Supplied will be

Q_SC = 3*68 - 120 = 204 - 120 = 84 UNITS

At a output of 84 units the quantity demanded will be

$\large Q_D = 186 -0.4P$

$\large 84 = 186 -0.4P$

$\large 0.4P = 186 -84 = 102$

P = $ 255 per unit

Consumer Surplus = (1/2)*(465-255)*84 +(255-68)*84

= 8820 + 15708

= $ 24,528

Refer the attached picture the consumer surplus = A+B+C