Question

Hello all, I have a Midterm tomorrow and am having an issue with how my Professor got the following answers. Any help would be great exe. they got the values for the math from... The answer is highlighted in yellow according to my professor.

19. Consider a market for fish whose market demand and market supply for fish is specified as Qd = 300 - 2.5 P and Qs = -20 + 1.5 P respectively. The equilibrium price and quantity is: A. $40 and 200 respectively. B. $80 and 100 respectively. C. $100 and 80 respectively. D. $100 and 130 respectively. To find equilibrium price, set Qd = Qs and solve for P. Doing so gives you $80. Substituting P = 80 into either equation you find that Q = 100.

Answer 1

19.

Given,

Qd = 300 - 2.5P

Qs = -20 + 1.5P

At equilibrium, Qs = Qd

=> -20 + 1.5P = 300 - 2.5P

=> 1.5P + 2.5P = 300 + 20

=> 4P = 320

=> P = 320/4 = 80

Therefore, equilibrium price = $80

In order to obtain equilibrium quantity, substitute P = $80 in Qs or Qd

Equilibrium quanity = 300 - 2.5 x 80 = 300 - 200 = 100 units

Ans: $80 and 100 respectively

23. Before the imposition of tax:

Price Demand 0 300 400 500 1000 Quantity

Consumer surplus is denoted by the shaded traingale area (Consumer surplus is denoted by the area under the demand curve and above the equilibrium price)

Consumer surplus = Area of the traingle = 0.5 x base x height = 0.5 x 500 x (20-10) = 0.5 x 500 x 10 = $2500

After the impostion of $4 tax:

Price Demand 0 300 400 500 1000 Quantity

Consumer surplus is denoted by the area of the shaded traingle in the above graph. (Note the decrease in the area of the triangle from previous graph)

Consumer surplus = 0.5 x base x height = 0.5 x 400 x (20-12) = 0.5 x 400 x 8 = $1600

Ans: $2,500 to $1,600