Module 4 Assignment: Problem Set — Applications of Supply and Demand

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Applications of Supply and Demand Problem Set[1]

  1. The graph below shows the supply and demand curves for burritos. Suppose that the government imposes a Price Ceiling equal to $5.

Coordinate plane showing supply and demand curve and a price ceiling at $5. The supply curve and demand curve intersect at (3, 5). The y intercept for the demand curve is (0, 8) and the x intercept for the demand curve is (8,0). The demand curve intersects the price ceiling at (3, 5). The y intercepts for the supply curve is (0, 2). The supply curve intersects the price ceiling at (3, 5)

Will this result in a binding or non-binding price ceiling?

Use the following information to answer questions 2 through 7:

The graph below shows the supply and demand curves for soda.

Coordinate plane showing supply and demand curve and a price floor at $8. The supply curve and demand curve intersect at (2, 6). The y intercept for the demand curve is (0, 8) and the x intercept is (8,0). The demand curve intersects the price floor at (0,8). The y intercept for the supply curve is (0,4). The supply curve intersects the price floor at (4, 8).

  1. First consider a situation without any government interventions and no price controls. In that case, what is the equilibrium quantity?
  2. What is the equilibrium price?
  3. Now suppose that the government imposes a Price Floor equal to $8. As a result of this new policy, what is the quantity demanded?
  4. What is the new quantity supplied?
  5. As a result of this Price Floor, is there shortage or surplus, or is the price control non-binding?
  6. What is the amount of the shortage or surplus?

 

Use the following information to answer questions 8 through 10:

The graph below shows the supply and demand curves for pizza rolls.

Coordinate plane showing supply and demand curve intersecting at (4, 5). The y intercept for the demand curve is (0, 12) and the x intercept is (7,0). The supply curve y intercept is (0,1) and the slope of the supply curve is 1.

  1. What is the size of consumer surplus?
  2. What is the size of producer surplus?
  3. What is the size of social (total) surplus?

 

Use the following information to answer questions 11 through 14:

The graph below shows the supply and demand curves for beer. Suppose that the government imposes a Price Ceiling of 4.

Coordinate plane showing supply and demand curve and a price ceiling of $4. The supply curve and demand curve intersect at (3, 5). The demand curve y intercept is (0, 8) and the x intercept is (8, 0). The demand curve intersects the price ceiling at (4,4). The supply curve's y intercept is (0, 2) and the supply curve intersects the price ceiling at (2,4).

  1. What is the size of consumer surplus?
  2. What is the size of producer surplus?
  3. What is the size of deadweight loss?
  4. What is the size of social (total) surplus?

 

Use the following information to answer questions 15 through 23:

Use the graph below to answer the following questions.

Coordinate plane showing supply and demand curve and a price ceiling of $5. The supply curve and demand curve intersect at (2, 6). The demand curve y intercept is (0, 8) and the x intercepts is (8, 0). The demand curve intersects the price ceiling at (3, 5). The y intercept of the supply curve is (0, 4) and the supply curve intersects the price ceiling at (1, 5).

  1. What is the size of consumer surplus when there is no government price control?
  2. What is the size of producer surplus when there is no government price control?
  3. What is the size of social surplus when there is no government price control?
  4. What is the size of deadweight loss when there is no government price control?
  5. What is the size of consumer surplus when a price ceiling of $5 is imposed?
  6. What is the size of producer surplus when a price ceiling of $5 is imposed?
  7. What is the size of deadweight loss from a price ceiling of $5?
  8. What is the size of social surplus when a price ceiling of $5 is imposed?
  9. What is the difference between total surplus before and after price control is imposed? How does this number compare to the deadweight loss?

Use the following information to answer questions 24 through 32:

The graph below shows the supply and demand curves for beer.

Coordinate plane showing supply and demand curve and a price floor of $9. The supply curve and demand curve intersect at (40, 6). The demand curve y intercept is (0, 10) and the x intercept is (100, 0). The demand curve intersects the price floor at (10, 9). The supply curve y intercept is (0, 2) and the supply curve intersects the price ceiling at (70, 9).

  1. What is the size of consumer surplus when there is no government price control?
  2. What is the size of producer surplus when there is no government price control?
  3. What is the size of social surplus when there is no government price control? What is the size of deadweight loss when there is no government price control?
  4. What is the size of consumer surplus when Price Floor of $9 is imposed?
  5. What is the size of producer surplus when Price Floor of $9 is imposed?
  6. What is the size of deadweight loss from Price Floor of $9?
  7. What is the size of social surplus when Price Floor of $9 is imposed?
  8. What is the difference between total surplus before and after price control is imposed?
  9. How does this number compare to the DWL?

 

 

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