Question

. U OU? -MUUile Wi-For Questions 1-15. Odur a competitive market for a good where the demand curve is determined the demand function: P = 5+-1'Qd and the supply curve is determined by the supply Function: P-0.5'Os Where P stands for Price, QD is quantity demanded and OS is quantity supplied. 1. What is the quantity demanded of the good when the price level is $47 2. What is the quantity supplied of the good when the price level is P. $47 At P.$4 there is a. Competitive equilibrium in the market b. Excess supply in the market; . Excess demand in the market: d. Rationing in the market: 1. What is the value of the price elasticity of demand the price of the good changes from Po $4 to PI-$52 NOTE: Express your answer in NEGATIVE terms 5. What is the value of the price elasticity of supply if the price of the good changes from Po-$4 to P-55? 5. What is the equilibrium quantity level for the good in the competitive market? 7. What is the equilibrium price level for the good in the competitive market? 8. What is the consumer surplus in the competitive market? What is the producer surplus in the competitive market? 10. What is the total surplus in the competitive market? For Questions 11-15, additionally assume a market Intervention of the form of per unit $2 tax on the consumption of the good. 11. How many units of the good are sold in the market at equilibrium considering this market Intervention? 12. How much are consumers going to pay per unit of the good under this market intervention? 13. How much is the per unit amount that producers will receive as payment under this market Intervention? 14. How much are the tax revenues under this market intervention? 15. How much is the Dead Weight Loss under this

Question 15:

how much is the dead weight loss under this market intervention ?

Answer 1

the good. Excers. P=5+ lxld.? 5 - dd. P=0.5&s. A-) when - $4, 4= 5- Od. Od = 5-4 = 1 unit. A-2) when = $4, 42 0.5x ds as Yo= 8 units A-3 Option b. At price = 84 The Quantity supplied of exceeds its cuantity demanded and this creates supply of the good in the market. A-4 for $4, d. 2 1 wit, P = 45. , sa sold, f = 0 unit. Thus, price elasticity of = ardo x Po demand 1-2 do 2 or 1x 4 5- 41 - -4. edo -4,