The demand and supply for bread in 18th century France are given by the followin

Question

The demand and supply for bread in 18th century France are given by the following equations: P=20-Q_D & P=Q_S Graph these equations Calculate the equilibrium price and quantity A drought hits France and the rest of Europe, decreasing supply to P=4Q_S. What is the new equilibrium price and quantity of bread? Show it as well. If the French government imposes a price ceiling on bread equal to the original price before the drought, how much bread will be sold? What is the magnitude of the shortage? f. How long will people wait in line (assuming no bribes and secondary markets) for bread if they value their time at $1/hour? Show the consumer surplus after the price ceiling assuming those with the highest WTP get the bread. h. If bribing was acceptable and everyone practiced it, how large would consumer surplus be now? How large would producer surplus be? Some of the French peasants begin to riot over the shortage of bread, and Marie Antoinette responds "Let 'em eat cake." What happens to her?

Explanation / Answer

1)

2) Q = 20-Q so Q= 10 and P = 20-10 =10 From the graph we can See that equilibrium price and quantity is 10,10

3) 4Q = 20-Q so Q=4 and P=4*4 = 16

4) Now if there is price ceiling $10 then there will be shortage As Q= P/4 =10/4 = 2.5 units will be sold

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