Suppose a market is governed by the Supply and Demand equations
below. Qxs = -16 + Px Qxd = 92 – 2Px
a. Solve for the equilibrium price and quantity of X and graph
b. How much economic surplus exists in this market? How much
belongs to producers and how much to consumers?
c. What will happen to price and quantities demanded and sold if
the government implements a price ceiling of $30? What will be the
excess demand and excess supply that result from this policy? How
much surplus will be lost to society as a result of this policy?
What Demonstrate on your graph.
d. Suppose the government implements a price floor of $40
instead of the price ceiling in “b” above. What will happen to
price, quantities, excess supply and demand, and economic surplus?
Demonstrate on a new graph.
e. The government has decided the price floor is too high and
decides to lower it to $32. What will happen to price, quantities,
excess supply and demand, and economic surplus?