1. The supply and demand for a given size of flat screen TVs is given by the following equations. P = 1000 - 1.5Qd, P = 60 + 2.5Qs
a. What is equilibrium quantity?
b. What is equilibrium price?
c. Graph the supply and demand curves below, show equilibrium and any positive intercepts, and calculate producer surplus.
d. Now suppose that the state of Colorado determines that the price of these TVs is too low and imposes a minimum price of $700. Is this a price ceiling or a price floor?
e. Show the market outcome in your graph from part c. (show QS and QD), and calculate producer surplus with the imposed price.
f. With the imposed price of $700, there exists a surplus/shortage (circle one) of ____________ (how many TVs?).
2. The supply and demand equations for basic 5-shelf bookcases are given below. P = 110 - 0.5Qd, P = 20 + Qs
a. What is equilibrium quantity?
b. What is equilibrium price?
c. Graph the supply and demand curves, and show equilibrium.
d. Now suppose that the government decides to tax producers $15.00 per bookcase that they sell. Calculate the new equilibrium prices and the quantity sold, and draw the new (with tax) equilibrium outcome on the above graph.
e. How much of the tax do the consumers pay? How much do the producers pay? (just give $ per unit of the tax, not total).
f. What is the deadweight loss of the tax