Consider the implications of the revised labelling standards in the context of the hypothetical market for bottled mineral water. The market demand and market supply equations are as follows;
QD = -100P + 1150 and QS = 400P - 100,
a. Determine the equilibrium price and quantity at this level.
Now, suppose the change in standards results in a new market supply of
QS' = 400P - 350, with no change in market demand.
b. Determine the PE' and QE' for bottled mineral water.
c. Graphically illustrate the market for bottled mineral water before and after the change in labeling standards. Be sure to label all relevant points.
d. Compare the values of consumer surplus and producer surplus before and after the change in labeling standards. Is this result expected? Why or why not?