2· The demand for tickets to Valley Fair Amusement Park is QD= 5,000-120P, while
ID: 1143556 • Letter: 2
Question
2· The demand for tickets to Valley Fair Amusement Park is QD= 5,000-120P, while the supply of tickets is Qs= 80P. What is the equilibrium price, P*, and quantity, Q*, for tickets to Valley Fair? (4 points) 2 The figure below illustrates the supply, Qs, and demand, Qo, for prescription drugs. Illustrate the equilibrium market price and quantity. Label the equilibrium market price Po and the equilibrium market quantity Qo. (2 points) Illustrate the consumer and producer surplus for the equilibrium market price and quantity. (4 points) Suppose the government has decided that the price of prescriptions drugs is too high, so it passes a law imposing a price ceiling Pcthat is below the market equilibrium price. Illustrate this price ceiling on the figure below. (2 points) Show the quantity of drugs supplied under this price ceiling and label it Qsc. (2 points) Show the quantity of drugs demanded under this price ceiling and label it Quc. (2 points) What quantity of drugs will be traded? Does this price ceiling result in a surplus or shortage of drugs? (4 points) Explain why this price ceiling is inefficient. (2 points) 3. a. b. c. d. e. f. 8 g.Explanation / Answer
Answer : 2) Given, QD = 5000 - 120P; Qs = 80P.
We know that in equilibrium, QD = QS
=> 5000 - 120P = 80P
=> 5000 = 120P + 80P = 200P
=> P = 5000/200 = 25.
Now, Q = 80 × 25 = 2000
Therefore, equilibrium price (P*) = 25 and equilibrium quality (Q*) = 2000 for tickets to Valley Fair.
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