Problem
In the market for music discs, demand and supply are given by the following equations:
Qd =30-2P
Qs=2P
1. Calculate the equilibrium price and quantity, and present this in a diagram.
2. Explain what is a price ceiling and a price floor? How do they affect consumer and producer surplus?
3. What will happen in this market if the government imposes a price ceiling of 5? What will happen in this market if the government imposes a price floor of 10?
4. From the above demand and supply functions, derive the inverse demand and supply function.