Answer to Question #62317 in Macroeconomics for Dominic
In a perfectly competitive market, the market demand curve is given by Qd = 200 -5P, and
the market supply curve is given by Qd =35P.
i. Find the equilibrium market price and quantity demanded and supplied in the absence
of price controls.
ii. Suppose a price ceiling of $2 per unit is imposed. What is the quantity supplied with a
price ceiling of this magnitude? What is the size of the shortage created by the price
iii. Find the consumer surplus and producer surplus in the absence of a price ceiling.
iv. Find the consumer surplus and producer surplus under the price ceiling.