What is the equilibrium price and quantity of beer

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Reference no: EM132461113

Consider the market for beer as described by the following equations:

Demand: Q_D = 30 - 0.5P, Supply Q_S = - 1.5 + 0.25P.

where Q is measured in millions of barrels per year and P is the price in dollars per barrel.

a. What is the equilibrium price and quantity of beer? Illustrate the equilibrium graphically.

b. Calculate the consumer surplus and producer surplus at the equilibrium price. Identify CS and PS on your diagram.

c. With the increase in the price of hops (input in beer processing), 500,000 fewer beers are offered for sale. Calculate the new equilibrium price and quantity. What happens to CS and PS?

Reference no: EM132461113

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