Question

PART III - QUANTITAYIVE QUESTIONS Answer ALL the following questions. Show any work and calculation. No marks will be allocated for answers without work. 1. Halloween costumes are becoming more popular as we are getting closer to Halloween. The domestic demand and supply for Halloween costumes in Canada are given by the following equations, where is the quantity of Halloween costumes and P is the price of Halloween costumes: P = 80 - (1/500) Q and P - 20 + (1/1000) Os Initial Equilibrium a. Determine the equilibrium price and quantity for the domestic market of Canada. b. Draw a graph (Diagraml) representing the initial equilibrium for Halloween costumes with accurate labels and show the area for consumer surplus (CS) and producer surplus (PS). Price Floor c. d. Suppose now the government decides to intervene the market with a price floor of S50, determine quantity demanded and quantity supplied. Is this a surplus or a shortage? Draw a graph (Diagram 2) representing the market for Halloween costumes at a price floor of S50 with accurate labels and show the area for consumer surplus (CS), producer surplus (PS), and deadweight loss (DWL). Price Ceiling e Suppose now the government decides to intervene the market with a price ceiling of S25, determine quantity demanded and quantity supplied. Is this a surplus or a shortage? 1. Draw a graph (Diagram 3) representing the market for Halloween costumes at a price ceiling of 25 with accurate labels and show the area for consumer surplus (CS), producer surplus (PS), and deadweight loss (DWL). Taxation & h. Suppose now the government decides to intervene the market with a tax on producers of S4, determine the price for the consumer, the price for the producer, and the quantity produced with the tax Draw a graph (Diagram 4) representing the market for Halloween costumes with a tax on producers of S4. Accurately label and show the area for consumers (CS), producer surplus (PS), deadweight loss (DWL), and government revenue (GR) Calculate the consumer surplus (CS). producer surplus (PS), total surplus (TS), deadweight loss (DWL), and government revenue (GR). i.

Answer 1

Penci P-20+ Os Tooo a) Looo 40000 oby com is achieved when Op = Os 86 - = 20 + Ons 80 = 30 00 2.20009) 4/P=40] looo 1000 consumer suples = area ABE a 3x20000 & 40= 400000 Produn suples = ana BCE = 2x20000220 = 200000 Peuce floor = 50, Os = 15000e Gros - 38000 போதே வ லை |100 tiba al consumer surplus = area Ama = x 30 x 15000 = 223000 final producen suplers & area anum & 15x15000 + 15x15000 = 337500