Consider the following supply and demand functions
q_{D} = 12 -
3p
q_{S} = -3 + 2p
Using the supply and demand functions, suppose a price ceiling of p = 2 were implemented.
a. Q supplied = 1 and Q demanded =
6
b. The excess demand = 5
c. CS= 0.5*3*1 = 1.5, PS = 0.5*3*(3-1.5)= 2.25, welfare level =
CS+PS = 1.5+0.75=3.75
d. CS= 0.5*(4-3.67)*1+(3.67-2*1) = 1.835, PS = 0.5*(2-1.5)*1 =
0.25, welfare level =
CS+PS = 1.835+0.25=2.085, DWL =0.5*(3.67-2)*2 = 1.67
e. Q supplied = 5 and Q demanded = 0
The excess demand = 0
CS= 0.5*3*1 = 1.5, PS = 0.5*3*(3-1.5)= 2.25, welfare level = CS+PS
= 1.5+0.75=3.75
CS= 0, PS = 0.5*3*(4-1.5)= 3.75,
welfare level = CS+PS = 0+3.75=3.75
DWL =0
Consider the following supply and demand functions qD = 12 - 3p qS = -3 +...
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