Question

Qd = 180 - 2P,

Qs = ‐ 15 + P

The market is government-regulated with a price support per unit and production quotas. If the price is set at $72 per unit, what production quota is needed to make sure there are no shortages or surpluses?

 

a.an increase in the demand for the good. new demand equation is Qd = 190 - 2P. The government is trying to decide between two options:

Maintain the number of quotas and let the market adjust, or

Maintain the price support and increase the number of quotas.

 

Answer 1

$$180-2p=-15+p$$

$$3p=195$$

$$p=65$$

If p=72, then

$$Q_D=180-2\times72=36$$

$$Q_S=-15+72=57$$

$$\varDelta Q=57-36=21$$

If

$$Q_D=190-2p$$

$$190-2p=-15+p$$

$$3p=205$$

$$p=68.3$$

$$Q_D=180-2\times68.3=43.4$$

$$Q_S=-15+68.3=53.3$$

$$\varDelta Q=53.3-43.4=9.9$$