If a consumer can afford to buy up to 12,000 gallons of water a month but the go
ID: 1140331 • Letter: I
Question
If a consumer can afford to buy up to 12,000 gallons of water a month but the government restricts purchases to no more than 10,000 gallons a month, how do the consumer's budget line and opportunity set change? Suppose the market for grass seed can be expressed as: 5. 6. Demand: QD 100 2p Supply: Qs 3P Answer the following questions: a. Calculate the price elasticities of supply and demand at the market equilibrium. b. If the government imposes a price ceiling of s15, how big is the excess demand? c. If the government imposes a price floor of s8, how big is the excess supply? d. If the government imposes a quota of 50, what is the market price likely to be? 7. If the indifference curves slope upward, what assumption(s) about preferences does that violate? If the indifference curves cross, what assumption(s) about preferences does that violate? 8.Explanation / Answer
6) Qd = 100 - 2P
Qs = 3P
100-2p=3p or 100 = 5p
p= 20
Q = 60
a) pes = partial derivative of supply function * P /Q
PES = 3 * 20 / 60 = 1
PED = partial derivative of demand function * P /Q
PED = -2*20/60= -0.66
b) A price ceiling of $15 ..then QD = 100 - 2*15 = 70
Qs = 3*15 = 45
so, the excess demand = 70 -45 = 25 units.
c) A price floor of $18 , then QD = 100-2*18 = 64
QS = 3*18 = 54
Excess supply - 54 -64 = -10 units.
d) impose a quato og 50 untis. then
Qd = 100 - 2P
50 = 100 -2P
2P = 50
P = 25
so, the market price likely to be $25.
6, 7 and 8 - please upload it agiant. it against chegg policy.
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