Question #59633

Two Step Tariff. Determine the equivalent quota.

D: P = 124 - 2Q

S: P = 44 + 2Q

Tariff: P = 40.

D: P = 124 - 2Q

S: P = 44 + 2Q

Tariff: P = 40.

Expert's answer

D: P = 124 - 2Q

S: P = 44 + 2Q.

In equilibrium Qd = Qs and P is the same, so:

124 - 2Q = 44 + 2Q,

4Q = 80,

Q = 20 units.

P = 124 - 2*20 = $84.

If a tariff of P = $40 is imposed, then new price is P = $124, then the new quantity demanded is:

124 = 124 - 2Q,

Qd = 0 units.

The new quantity supplied is:

124 = 44 + 2Q,

2Q = 80,

Qs = 40 units.

So, the equivalent quota is Qs - Qd = 40 - 0 = 40 units.

S: P = 44 + 2Q.

In equilibrium Qd = Qs and P is the same, so:

124 - 2Q = 44 + 2Q,

4Q = 80,

Q = 20 units.

P = 124 - 2*20 = $84.

If a tariff of P = $40 is imposed, then new price is P = $124, then the new quantity demanded is:

124 = 124 - 2Q,

Qd = 0 units.

The new quantity supplied is:

124 = 44 + 2Q,

2Q = 80,

Qs = 40 units.

So, the equivalent quota is Qs - Qd = 40 - 0 = 40 units.

## Comments

## Leave a comment