unit 4 - price ceiling calculation

Unit 4 – Government Intervention – Paper 3 – Calculating the Efect o a Price Ceiling Given the following Supply/Demand Function:

Qd = 2! – 4P Q" = #! $ P 1. Calculate Calculate the Price Price and and Quantity Quantity euili!ri euili!rium. um. ". Calculate Calculate the Price Price and and Quantity inter intercept cept# # for the Demand function. $. Calculate Calculate the Price Price inter intercept cept for the Supply Supply function. function. %. Graph the Supply Supply and Deman Demand d function. function.

%he Government intervene" in the mar&etplace and place" a Price on 'ice o o (2! per per unit)

1. &llu#trate &llu#trate the the Price Price Floor Floor on your e'i#ti e'i#ting ng graph. ". Show and calculate calculate the the e'ce## e'ce## #upply/dem #upply/demand and in the mar(et mar(et place. $. &# the Price Price Floor e)ective e)ective* * +hy/why +hy/why not*

Con"umer*Producer +urplu" and %otal ,elare -o"" 1. Calculate Calculate the Con#um Con#umer er Surplu# Surplu# with with no Government Government &ntervention. ". Calculate the Producer Producer Surplu# with no Government Government &ntervention. &ntervention. $. Calculate Calculate the Con#umer Con#umer Surplu# Surplu# with Governm Government ent &ntervent &ntervention. ion. %. Calculate the Producer Producer Surplu# with with Government Government &ntervention. ,. Calculate the -otal +elfare +elfare o## o## with Government Government &ntervention. &ntervention.