Question

please write neatly and show all work and steps, also if you want me to put number 3 on a separate question I can just comment on this post right when you see this and I'll try to get it posted asap.

Sol 1 Do 0 00 Quantity Analyzing the Effect of a Price Floor on Consumer and Producer Surplus The figure illustrates a market in equilibrium. Use the figure to answer the following questions: 1) Suppose that each notch along the vertical axis represents a $10 increment, so that P, is $30. Suppose also that each notch along the horizontal axis represents 100 units of quantity, so that Q, is 300. Calculate the amounts of consumer and producer surplus in the market. 2) Suppose that the government imposes a price floor of $40. Illustrate the price floor on the graph and recalculate the amount of consumer surplus. Evaluate the change in producer surplus.

Answer 1

Solution - 1 at Equilibrium, consumer supplus 12x (60-30) x 300 V2X 30 X 300 12 X 9000 = $ 4500 7 C Producer Surplus 1/2 X (30-0) X300 1/2 X30X300 = 1/2 X 9000 $ 4500 2) Impose price Ricor @ $40 60 cs SO CS = 1/2*460-40 x 200 So 112720 x 200 = 1/2X4000 4- 3 ov price for $2000 40 30 putt 20 o Do PS - 112x20 x2000 + (40-20) x 200 1/2 X 4000 + 20X200 2000 + 4000 $ 6000

3) Impact of price Rioon Surplus or producer anerease $6000 - 4500 $ 1500 Surplus of consumer Decreases $4500 - $ 2000 $2500 Guantity Decoense, Price Increases and DOL created ,
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