Producer surplus and consumer surplus

Reference no: EM1315737

Suppose that the domestic demand and supply for hats in a small open economy are given by:

Q = 80 - 2P (demand)

Q = 20 + 2P (supply)

Where Q denotes quantity and P denotes price.

After the quota of 18 units is imposed, how has domestic welfare been affected? (Assume all quota rents go to domestic producers and calculate a value for the change in welfare between the free trade outcome and the quota outcome). . You do not need to show a graph for this part.

Reference no: EM1315737

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