9.7. UI IL SITUII Pun, use the industry short-run supply curve to recalculate th
ID: 1119124 • Letter: 9
Question
9.7. UI IL SITUII Pun, use the industry short-run supply curve to recalculate the answers to part b. g. What is the new long-run equilibrium for the industry? Suppose that the demand for broccoli is given by Demand: Q = 1,000 – 5P where Q is quantity per year measured in hundreds of bushels and P is price in dollars per hundred bushels. The long-run supply curve for broccoli is given by Supply: Q = 4P – 80 a. Show that the equilibrium quantity here is Q = 400. At this output, what is the equilibrium price? How much in total is spent on broccoli? What is consumer surplus at this equilibrium? What is producer surplus at this equilibrium? b. How much in total consumer and producer surplus would be lost if Q = 300 instead of Q = 400? Show how the allocation of the loss of total con- sumer and producer surplus between suppliers and demanders described in part b depends on the price at which broccoli is sold. How would the loss be shared if P = 140? How about if P = 95? d. What would the total loss of consumer and pro- ducer surplus be if Q = 450 rather than Q = 400? Show that the size of this total loss also is indepen- dent of the price at which the broccoli is sold. e. Graph your results. milhandmade snuffbox industry is composed of 100Explanation / Answer
a) Demand = supply .
1000 -5P = 4P-80
9P = 1080
P = $120
at equilbruim price, Q = 1000 -5*120 = 400
so, Q = 400
Consumer surplus = 1/2 * (200-120) * 400 = $16000
producer surplus = 1/2 * (120-20) * 400 = $20000
b) Consumer surplus = 1/2 * (200-120 ) *300 = $12000
producer surplus = 1/2 * 100 *300 = $15000
loss in consumer surplus = $4000 . ( 16000 -12000 = 4000)
loss in producer surplus = $5000 . ( 20000 - 15000 = 5000)
d) consumer surplus = 1/2 * 80 * 450 = $18000
producer surplus = 1/2 * 100*450 = $22500
so , there will be gain in consumer surplus of $2000 and gain in producer surplus = $2250 .
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