ECON 251 AUM Equilibrium Price & Equilibrium Quantity Question
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Academic Year:
2021/2022
Semester:
Fall 2021
Section:
U1
Course Information
Course Code:
ECON251
Instructor Name:
Mohamed Sraieb
Assignment Information
Assignment 1 Group (15%)
Assignment Type:
14/11/2021 23:59 P.M
Due Date:
No of Questions:
Number of Pages:
4
Marks Earned
/ 100
Student Information:
Students
Name:
ID:
Name:
ID:
Name:
ID:
Name:
ID:
Name:
ID:
Regulations:
This is a group assessment.
Please, solve all the questions and show all your work.
Problem 1 (50 points)
Price ($)
The following diagram represents market for a normal good.
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0
0
1
2
3
4
5
6
7
8
9
10
Quantity
a) What are equilibrium price and equilibrium quantity?
b) If the government imposes price ceiling of $6 in this market, will there be a
surplus or shortage? Calculate. Show your calculations.
c) Calculate consumer surplus and producer surplus when the price ceiling is in
place. Show your calculations and show the area of each surplus on the graph.
d) Calculate the value of the resulting deadweight loss. Show your calculations.
e) Assume now, that the government imposes a price ceiling of $12. Calculate the
deadweight loss, if any and show your calculations.
Problem 2 (20 points)
The following table represents the demand and supply schedules for a normal good.
Price
2
4
6
8
10
12
14
Qauntity
demanded
120
100
80
60
40
20
0
Quantity supplied
0
20
40
60
80
100
120
a) What are equilibrium price and equilibrium quantity?
b) Assume that the government imposes a quota of 4 in this market. Calculate
the value of deadweight loss due to the quota.
c) Calculate the quota rent.
Essay (30 points)
In the late eighteenth century, the price of bread in New Your City was controlled, set
at a certain level above the market price.
a) Draw a diagram showing the effect of the policy. Did the policy act as a price
ceiling or a price floor?
b) What kinds of inefficiencies were likely to have arisen when the controlled price
of bread was above the market price?
One year during this period, a poor wheat harvest caused a leftward shift in the supply
of bread and therefore an increase in its market price. New York bakers found that the
controlled price of bread is New York was below the market price.
c) Show on the same diagram as before the effect of the policy. Did the policy act
as a price ceiling or a price floor?
d) What kinds of inefficiencies were likely to have arisen when the controlled price
of bread was above the market price?
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Tags:
equilibrium price
equilibrium quantity
demand curves
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