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6. Assume Psub and Tech is zero for all sections EXCEPT for (vi) below (Double Shift).
i. Market Equilibrium: What is the equilibrium price and equilibrium quantity for and ?
ii. Elasticity:
What is the elasticity at the equilibrium price and output level?
iii. Producer and Consumer Surplus:
What are the Consumer and Producer Surplus?
iv. Price Controls: Suppose a relevant price control at price of $10 is implemented?
1. What type of price control is it? Price Ceiling Price Floor (Circle One)
2. What is the result? Surplus Shortage (Circle One)
3. How large is the shortage or surplus? ____________
v. Taxes: Given and what is the effect of a $10 dollar tax? Please identify:
1. Qtax
2. Price received by the sellers
3. Price paid by the consumers
4. Consumer Surplus
5. Tax Revenue

vi. Double Shifts: Given and . Suppose Tech increases to 225 and Psub to $1.
1. Please calculate the new equilibrium price and quantity.


Solution Preview

i) Qd = -49.08P + 8000, Qs = 10P - 25, at equilibrium, Qd = Qs

-49.08P + 8000 = 10P - 25, P = 135.83, Q = 1333.3

ii) elasticity of demand = P/Q X (dQ/dP)

dQ/dP = d(-49.08P + 8000)/dP = -49.08,

elasticity = (135.83)/(1333.3) X (-49.08) = -5

iii) Look at the graph I attached (csps),

CS ...

Solution Summary

The expert calculates the new equilibrium price and quantity. Double shifts are analyzed.