1.

Market demand and supply for product X are

(D): P = 60 – 0,25Q
(S): P = 10 + 0,25Q
a. What are the equilibrium price and quantity in the market? (Pd = Ps -> Q1, P1)

b. What is consumer surplus? What is producer surplus? (HINT: draw a diagram)

c. If the government sets the price ceiling P=30. What will happen to the market?

d. Calculate the change of consumer surplus and producer surplus.

e. Illustrate your answers on a diagram.

2. Market demand and supply for product X are
(D): Qd = -10P + 2200
(S): Qs = 5P + 100
a. What are the equilibrium price and quantity in the market? (Qd = Qs → P1, Q1)
b. What is consumer surplus? What is producer surplus? (HINT: draw a diagram)

c. If the government sets the price floor P=150. What will happen to the market?
d. Calculate the change of consumer surplus and producer surplus.
e. Illustrate your answers on a diagram.
3. Market demand and supply for product X are
Ps = 50 + 8Q
Pd = 100 - 2Q
a. What are the equilibrium price and quantity in the market?
b. What is consumer surplus? What is producer surplus?
c. Suppose the government imposes a unit tax of 10. Determine the price that the
buyer has to pay, the price that the seller receives, and burden of the tax.

d. Calculate consumer surplus, producer surplus, tax revenue and dead weight loss.
e. Illustrate your answers on a diagram.