04+Applications+of+Supply+and+Demand PDF

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Applications of Supply and Demand Problem Set1 1. The graph below shows the supply and demand curves for burritos. Suppose that the government imposes a Price Ceiling equal to $5.

Will this result in a binding or non-binding price ceiling? This is a binding price ceiling because price ceiling happens where price equilibrium is occurring.

Use the following information to answer questions 2 through 7: The graph below shows the supply and demand curves for soda.

2. First consider a situation without any government interventions and no price controls. In that case, what is the equilibrium quantity? 1 This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License.

Equilibrium quantity is 2 units 3. What is the equilibrium price? Equilibrium Price is $6 4. Now suppose that the government imposes a Price Floor equal to $8. As a result of this new policy, what is the quantity demanded? Quantity Demanded is 0, when price floor equal to $8 5. What is the new quantity supplied? Quantity Supplied is 4 when price floor equal to $8 6. As a result of this Price Floor, is there shortage or surplus, or is the price control non-binding? There is going to be a Surplus and is going to be Binding since price floor is above the equilibrium line. 7. What is the amount of the shortage or surplus? Q-supply – Q-demanded = 4-0= 4 units

Use the following information to answer questions 8 through 10: The graph below shows the supply and demand curves for pizza rolls.

8. What is the size of consumer surplus? ½ (4*7) =14 9. What is the size of producer surplus? ½ (4*4) =8

10. What is the size of social (total) surplus? 14+8=22

Use the following information to answer questions 11 through 14: The graph below shows the supply and demand curves for bagels. Suppose that the goverment imposes a Price Ceiling of 4

11. What is the size of consumer surplus? ½ (4*2) = 4 12. What is the size of producer surplus? ½ (2*2) = 2 13. What is the size of deadweight loss? ½ (1*2) = 1 14. What is the size of social (total) surplus? 4+2= 6

Use the following information to answer questions 15 through 23: Use the graph below to answer the following questions.

15. What is the size of consumer surplus when there is no government price control? ½*(b*h) = ½ (2*2) = 2 16. What is the size of producer surplus when there is no government price control? ½*(b*h) = ½ (2*2) = 2

17. What is the size of social surplus when there is no government price control? Social Surplus is = 4 18. What is the size of deadweight loss when there is no government price control? 0 there is no deadweight loss 19. What is the size of consumer surplus when a price ceiling of $5 is imposed? 2*0=2 +.5 = 2.5 20. What is the size of producer surplus when a price ceiling of $5 is imposed? ½*(b*h) = ½ (1*1) = 0.5 21. What is the size of deadweight loss from a price ceiling of $5? ½ (1/2) = $1 22. What is the size of social surplus when a price ceiling of $5 is imposed? 2.5+.5= 3

23. What is the difference between total surplus before and after price control is imposed? How does this number compare to the deadweight loss? 3- 4 = 1 Is the difference between total surplus before and after. DWL is 1 which is equal at the total surplus these means that there is loss by the celling the price by the government.

Use the following information to answer questions 24 through 32: The graph below shows the supply and demand curves for beer.

24. What is the size of consumer surplus when there is no government price control? ½ (4*40) = $80 25. What is the size of producer surplus when there is no government price control? ½ (4*40) = $80 26. What is the size of social surplus when there is no government price control? What is the size of deadweight loss when there is no government price control? Social surplus is = $160, DWL = 0 27. What is the size of consumer surplus when Price Floor of $9 is imposed?

½ (1*10) =5

28. What is the size of producer surplus when Price Floor of $9 is imposed? (6*10) =60 +5 = $65 29. What is the size of deadweight loss from Price Floor of $9? 1/20 (30*6) = $90 30. What is the size of social surplus when Price Floor of $9 is imposed? 65+5 =$70 31. What is the difference between total surplus before and after price control is imposed? 160-70= $90 32. How does this number compare to the DWL? The total Surplus difference is $90 which is equal to the DWL, which means loss is in the market...