Question #101076
Assume that the daily demand for ice-cream is Q = 500 (P - 2) and Q = 11 000 - 1,000P. If the maximum sale price of ice cream is $ 4, how much will be the, producer and consumer profit ?
Expert's answer
Equilibrium price:
500(P-2) = 11000 – 1000P
500P - 1000 = 11000 – 1000P
1500P = 12000
P = 12000/1500 = $8
Equilibrium quantity:
Q = 500(8-2) = 3,000
Producer profit:
(8-4)(3,000)(1/2) = 6,000
Consumer profit (less):
(4-8)(3,000)(1/2) = -6,000
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Supply: Q = 500(P - 2) Demand: Q = 11000 - 1000P And now let us say that PDC imposes a price ceiling of $4 on ice-cream sandwiches—on the grounds that nobody should ever have to pay more than $4 for an ice-cream sandwich. Calculate producer surplus and Consumer surplus?