Calculate the changes in consumer-produce-total surplus

Reference no: EM133231997

Assignment:

Question

The market for a product is in equilibrium at 1200 units a month. Each one is sold for $400. Suppose the price elasticity of demand for this product is -0.8 and the price elasticity of supply is +1.4

a. Compute the slope and intercept coefficients for the linear supply and demand equations.

b. If the government imposed a price floor at 500 is imposed, what would be the new equilibrium price and quantity?

c. Calculate and illustrate the changes in consumer, produce and total surplus.

d. Comment on possible further costs to society beyond the deadweight loss.

e. Comment on the welfare changes if the price floor is supported by a commitment to buy the excess supply.

Reference no: EM133231997

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