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Business Math Price, Supply, and Demand Questions I

Fuzzyllama

New member
Sep 20, 2012
2
I need some help finishing a few problems on my assignment. Any help is appreciated

1. Suppose demand is given by Qd=100-5P. Qs=10P. The government imposes a price ceiling of $ \$4$. I am required to calculate consumer and producer surplus which i have, but i need to calculate the dead weight loss.

2. The current market price for bananas is $ \$.10$ per pound. 1 million pounds are demanded at this price. Elasticity of demand is -5 and short run Es is 0.05. Solve for the equations of demand and supply assuming they are linear.

Thanks in advance for any help!
 
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CaptainBlack

Well-known member
Jan 26, 2012
890
I need some help finishing a few problems on my assignment. Any help is appreciated

1. Suppose demand is given by Qd=100-5P. Qs=10P. The government imposes a price ceiling of $ \$4$. I am required to calculate consumer and producer surplus which i have, but i need to calculate the dead weight loss.
You do not tell us what the difficulty you are having with this question, please do. And please indicate what you have tried.

A few definitions:

Consumer Surplus: The area under the demand curve between the demand at \$0 and the demand at the current price.

Producer surplus: The area below the demand at the current price and above the demand curve between a price of \$0 and \$4.

The dead weight loss is the change in the total surplus.

2. The current market price for bananas is $ \$.10$ per pound. 1 million pounds are demanded at this price. Elasticity of demand is -5 and short run Es is 0.05. Solve for the equations of demand and supply assuming they are linear.

Thanks in advance for any help!
The demand curve is of the form:

\(Q_d = m P+c\)

and the supply curve of the form

\(Q_s = C + M P\)

You are told that \(M=-5\) and \(m = 0.05\) and that \(P=0.1\), \(Q_d=Q_s=1000000\) is the equilibrium point and so, on the demand curves.

CB