Question

180 22. (16 points) A market's demand and supply functions are as follows: Qd = 600 - 20P, and Qs = 10p - 30. a. (4 points) Determine the equilibrium price and quantity Coo-lop-lop-30 600 20021) = 600 = 30p- 30 - tro t30 180=Ep 1800E - 6302302 121= EQ 21 b. (4 points) Graph the inverse demand and supply curves. Indicate the intercept values. Label the axes, curves, and the equilibrium. C. (1 point) If the government sets a rule that the price cannot go below $24, what kind of a price restriction is this? (Answer in two words: price ceiling or price floor): 07 Hoor d. (1 point) Will this government price restriction cause a shortage or surplus? (Answer with one word: surplus or shortage.thart e. (2 points) Calculate the shortage or surplus based on your answer to part (d). ibuh = 1 (6) (150) = 2 (156) (150) o 156 = 14040 f. (4 points) Calculate the deadweight loss from the price restriction indicated in part (c). 1/2 boh ₂ (570) (150) Slzoo

Please help me i get lost around E. I got Eq=220 Ep=19. I dont know what im doing wrong

Answer 1

Answer : 22) a) At equilibrium Qd = Qs occur. So,

=> 600 - 20P = 10P - 30

=> 600 + 30 = 10P + 20P

=> 630 = 30P

=> P = 630 / 30

=> P = 21

From demand function we get,

Q = 600 - (20 * 21)

=> Q = 180

So, here the equilibrium price is $21 and quantity is 180 units.

b) The demand curve, supply curve and equilibrium are shown in following picture's diagram.

c) Here the equilibrium price is $21. Now if the price is set above equilibrium at $24 then the price restriction is called price floor.

by for demand curre to get the vertical axis intercept we have to take Q=0. So, O= 600-20P > 202 = 600 =) P=600/20 =) p =30 for horizontal axis intercept we have to take p=0. So, Qd = 600-(20 x0) =) Qd = 600 So, for demand curore the vertical axis intercept is 30 and horizontal anis intercept is 600. For supply cubre to get the vertical axis intercept we have to take Qs = 0. so, o= 10p - 30 - 30 = 10P p=30/10 =) P=3 So, for supply curove the vertical anis intercept is 3. Price (8) supply Te Equilibrium Demand 180 600 » Quantity

d) If price is set above equilibrium price then the quantity demanded decrease and quantity supplied increase. As a result, at price floor the market face excess supply situation which also known as surplus. As here the price floor is set at above equilibrium price level hence the government restriction will cause surplus.

e) When P = $24,

Qd = 600 - (20 * 24) = 120

Qs = (10 * 24) - 30 = 210

Surplus = Qs - Qd = 210 - 120 = 90

Therefore, here the surplus = 90 .