--%>
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 : New firms entry in industry What

    What persuades new firms to enter in an industry? Answer: Abnormal profit encourages new firms to enter an industry. 

    		•
  • Q : Problem on current production

    I have a problem in economics on current production possibilities frontier. Please help me in the following question. The combination of 70 units of clothing and 30 units of food are: (1) Completely employs the economy's capacity. (2) Would leave most

    		•
  • Q : Growth is a significant economic goal.

    Growth is a significant economic goal. Explain?

    		•
  • Q : Introduction of the term Cost Principle

    Give a brief introduction of the term Cost Principle ?

    		•
  • Q : Changing rates of Appreciation and

    Elucidate the changing rates of Appreciation and Depreciation?

    		•
  • Q : Self-interested motivation to underpin

    Adam Smith’s perception which self-interested motives underpin even charitable activities through apparently selfless people appeared originally into his primary major book that was entitled: (1) Theory of Moral Sentiments [1755]. (2) Leviathan

    		•
  • Q : Calculating fat-tax Question: Max has a

    Question: Max has a utility function U =√ x1x2 where x1 is litres of ice-cream and x2 is boxes of strawberries. The marginal utility of a litre if ice-cream is

  • Q : Least probability of competitive market

    The competitive market system is least probable to be allocatively unproductive as a result of: (w) externalities and public goods. (x) cutthroat competition and the outsourcing of low-wage jobs to less grown countries. (y) the underproduction of a go

    		•
  • Q : Society decide its optimal point on the

    How does society decide its optimal point on the production possibilities curve?

    		•
  • Q : Checkout problem A grocery store chain

    A grocery store chain is considering ways to improve the performance of the waiting lines at their checkout stands. A heavily trafficked checkout stand is monitored for 120 min. In that period, 60 customers have their groceries rung up, and depart from the store. The

    		•