--%>
Assignment Help - homework help

Are quantities supplied-demanded equal in intervation

In perfectly competitive market, the market demand curve is given by Qd = 10 − Pd, and the market supply curve is given by Qs = 1.5Ps.

a) Prove that the market equilibrium price and quantity in the lack of government intervention are of Pd = Ps = 4 and Qd = Qs = 6.

b) Let’s take two possible govt. interventions: (i) The price ceiling of $1 per unit; (ii) The subsidy of $5 per unit remunerated to producers. Prove that the equilibrium market price paid by consumers beneath the subsidy equivalents $1, the similar as the price ceiling. Are the quantities supplied and demanded similar beneath all government intervention?

E

Expert

Verified

a)    10 – P = 1.5P => P = 4 and Q = 10 – 4 = 6.

b) Beneath $5 subsidy remunerated to the producer, market price P = Pd and the after-subsidy price obtained by producers is Ps = Pd+5. Therefore: 10 – P = 1.5(P + 5) => P = 1.

   Related Questions in Business Economics

  • Q : Producers on the best combinations of

    How did producers decide on the best combinations of resources to use?  Who made these resources available, and why?

    		•
  • Q : Higher opportunity costs of attendance

    Economics professors would attribute students’ higher rates of attendance on days while examinations are administered to the: (w) intensified needs to learn valuable material. (x) higher opportunity costs of missing set relative to other schedul

    		•
  • Q : Depreciation of the euro change the

    If the European euro declines in value (depreciates) in the foreign exchange market, would it be easier or harder for the French to sell their wine in the United States?  Suppose you were planning a trip to Paris.  How would the depreciation of the euro chan

    		•
  • Q : The Federal corporate income tax Use

    Use the circular flow model to confirm this assertion for a 2% reduction in the Federal corporate income tax.

    		•
  • Q : Explain Unemployment Explain

    Explain Unemployment, Growth, and the Future?

    		•
  • Q : Problem on productive contribution

    Suppositions underpinning simple production possibilities frontier models don’t comprise a need that: (i) Net resources are fixed. (ii) All resources are efficiently employed. (iii) Technology is steady. (iv) Resource owners are paid according t

    		•
  • Q : Illustrate the term Positive and

    Illustrate the term Positive and Normative Economics?

    		•
  • Q : Introduction of the term Cost of

    Give a brief introduction of the term Cost of preference shares?

    		•
  • Q : Symptoms of governmental interference-

    Adam Smith and the “typical liberal” economists who followed within his footsteps viewed persistent monopolization and market power as: (1) ineffective and best regulated through government. (2) crucial in finding the rate of technological

    		•
  • Q : Problem regarding to intermediaries and

    Society gains from the activities of intermediaries which succeed within: (1) falling uncertainty and transaction costs for last consumers. (2) arbitrating strikes and defending workers’ rights. (3) creating productive jobs for unskilled workers

    		•