In a market demand and supply equations are: The demand curve is given as: P = 4

Question

In a market demand and supply equations are: The demand curve is given as: P = 40 - 4Q The supply curve is given as: P = 10 + 2Q.

1) What are the market competitive equilibrium price and quantity (P* and Q*), Consumer Surplus (CS), and Producer Surplus (PS) without government intervention ? Assume government imposes Price Cap of $15 on the market:

2) What would be the new equilibrium quantity in the market?

3) What would be the market Consumer Surplus and Producer Surplus?

4) What would be the Hidden Cost?

5) What would be the Deadweight Loss?

Explanation / Answer

Demand P = 40-4Q

Supply P = 10+2Q

THe answer of 1 question.

for competitve equilbruim price and quantity, demand equal to supply

40-4Q = 10 +2Q

40-10 = 2Q +4Q

30 = 6Q or Q = 5

P = 40 -4*5 = 20

so, the equilbruim price is $20 and quantity is 5

Consumer surplus = 1/2 * P * Q  

CS = 1/2 * (40-20) * 5 = 50

Producer surplus = 1/2 * P * Q

PS = 1/2 * ( 20-10) * 5 = 25

FOr question 2 and all, please repost the question again. ( its chegg policy to answer only 1)

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