Intro to Microeconomics Chapter 5

For Questions 1-20, consider a competitive market for a good where the demand curve is determined by the demand function: P=10-2QD and the supply curve is determined by the supply function: P=1+QS.

What is the quantity demanded of the good when the price level is P = $4?

QUESTION 2

What is the quantity supplied of the good when the price level is P = $4?

QUESTION 3

At P=$4 there is:

a. Competitive equilibrium in the market;

b. Excess supply in the market;

c. Excess demand in the market;

d. Rationing in the market;

QUESTION 4

What is the value of the price elasticity of demand if the price of the good changes from Po=$4 to Pi=$5?

NOTE: Express your answer in NEGATIVE terms.

QUESTION 5

What is the value of the price elasticity of supply if the price of the good changes from Po=$4to Pi=$5?

QUESTION 6

What is the equilibrium quantity level for the good in the competitive market?

QUESTION 7

What is the equilibrium price level for the good in the competitive market?

QUESTION 8

What is the consumer surplus in the competitive market?

QUESTION 9

What is the producer surplus in the competitive market?

QUESTION 10

What is the total surplus in the competitive market?

QUESTION 11

For Questions 11-15, assume a market intervention of the form of price floor. The price floor is set at P=$6. This price floor is binding, so it has an impact on the equilibrium of the economy.

How many units of the good the producers are willing to supply the market at the considered market intervention?

QUESTION 12

How many units of the good the consumers are willing to demand the market at the considered market intervention?

QUESTION 13

How many units of the good are going to be sold in the market at the considered market intervention?

QUESTION 14

What is the value of the Consumer Surplus considering this market intervention?

QUESTION 15

What is the value of the Producer Surplus considering this market intervention?

QUESTION 16

For Questions 16-20, assume a market intervention of the form of a $3 per unit tax on the consumption of the good.

How many units of the good are sold in the market at equilibrium considering this market intervention?

QUESTION 17

How much are consumers going to pay per unit of the good under this market intervention?

QUESTION 18

How much is the per unit amount that producers will receive as payment under this market intervention?

QUESTION 19

How much are the tax revenues under this market intervention?

QUESTION 20

How much is the Dead Weight Loss under this market intervention?