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QUESTION

The demand and supply for Q are given, respectively, by: Q = 500 - 20P (DEMAND) Q = -100 + 10P (SUPPLY) Suppose the government enacts a deficiency...

(SUPPLY)

Suppose the government enacts a deficiency payment of $22.

(a.) Graph the demand and supply equations

(b.) What are the equilibrium price and quantity?

(c.) Assuming the demand and supply curves given above, suppose that a price support of $22 were set by the government. What are the new quantity supplies and quantity demanded given the $22 price? How much Q will the government buy? What is the government's unit deficiency payment? Show this on a graph.

(d.) Calculate the welfare measures when moving from the free-market to the deficiency payment solution. specifically, find measures for changes in consumer surplus, producer surplus, taxpayer cost, and the deadweight loss.

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