The table below shows the demand and supply schedules for gizmos. a. Use the inf
ID: 1143798 • Letter: T
Question
The table below shows the demand and supply schedules for gizmos.
a. Use the information in the table to determine the market equilibrium quantity and price of gizmos.
b. Suppose the government wants to set a quota that states that only 8 gizmos can be exchanged. What is the demand price and what is the supply price at this quota limit?
c. At the quota limit of 8 gizmos, what is the quota rent available to sellers of gizmos?
d. Suppose instead that the government increases the production quota to 16 gizmos. Under this regulation, at what price will gizmos be purchased?
Price per Gizmo
Quantity of Gizmos
Demanded (Qd)
Quantity of Gizmos
Supplied (Qs)
$1.00
17
2
$1.50
16
4
$2.00
15
6
$2.50
14
8
$3.00
13
10
$3.50
12
12
$4.00
11
14
$4.50
10
16
$5.00
9
18
$5.50
8
20
Price per Gizmo
Quantity of Gizmos
Demanded (Qd)
Quantity of Gizmos
Supplied (Qs)
$1.00
17
2
$1.50
16
4
$2.00
15
6
$2.50
14
8
$3.00
13
10
$3.50
12
12
$4.00
11
14
$4.50
10
16
$5.00
9
18
$5.50
8
20
Explanation / Answer
Price per Gizmo
Quantity of Gizmos
Demanded (Qd)
Quantity of Gizmos
Supplied (Qs)
$1.00
17
2
$1.50
16
4
$2.00
15
6
$2.50
14
8
$3.00
13
10
$3.50
12
12
$4.00
11
14
$4.50
10
16
$5.00
9
18
$5.50
8
20
Answer:- the market equilibrium quantity and price of gizmos:- Equilibrium price = $3.5 and equilibrium quantity =12
The equilibrium point is achieved where the demand and supply are same and it is obtained when the quantity is equal to 12 and price of $3.50
Answer:- Suppose the government wants to set a quota that states that only 8 gizmos can be exchanged.
The demanded price will be $5.5 and supplied price will be $2.5
Answer:- Suppose instead that the government increases the production quota to 16 gizmos. Under this regulation, the price of gizmos should be $1.5
Price per Gizmo
Quantity of Gizmos
Demanded (Qd)
Quantity of Gizmos
Supplied (Qs)
$1.00
17
2
$1.50
16
4
$2.00
15
6
$2.50
14
8
$3.00
13
10
$3.50
12
12
$4.00
11
14
$4.50
10
16
$5.00
9
18
$5.50
8
20
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