Given the demand and supply system: Pb=51-5Qb & Pv =3+2Qv At a price-ceiling of

Question

Given the demand and supply system: Pb=51-5Qb & Pv =3+2Qv At a price-ceiling of P=5, what is the change in consumer surplus compared to the market? (Hint/Answer=-74.15) Given the demand and supply system: Pb=51-5Qb & Pv =3+2Qv At a price-ceiling of P=5, what is the change in consumer surplus compared to the market? (Hint/Answer=-74.15) Given the demand and supply system: Pb=51-5Qb & Pv =3+2Qv At a price-ceiling of P=5, what is the change in consumer surplus compared to the market? (Hint/Answer=-74.15) Pb=51-5Qb & Pv =3+2Qv At a price-ceiling of P=5, what is the change in consumer surplus compared to the market? (Hint/Answer=-74.15)

Explanation / Answer

Market price is found at Pb = Pv

51 - 5Q = 3 + 2Q

48 = 7Q

Q = 6.857, P = 3+2*6.857 = 16.714

When there is a price ceiling at P = 5, New quantity is 5 = 3 + 2Q of Q = 1 unit. At this quantity, consumers are willing to pay Pw = 51 - 5*1 = 46.

Change in consumer surplus = New consumer surplus - old consumer surplus = 0.5*(51 - 5 + 46 - 5)*1 0.5*(51 - 16.714)*6.857 = -74.04

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.