Problem - A mango Supply and Demand for a tropical country are given by ;
Demand: P = 50 - (QD) and supply: P = 25 + (QS) where QD = quantity demanded of mangoes and QS = quantity supplied of mangoes
1. Draw the market supply and demand curves. What are the efficient price and efficient quantity?
2. Show on your graph consumer surplus and producer surplus and calculate the values of consumer surplus and producer surplus.
3. The government decides to impose a price ceiling of $35. Illustrate graphically the different economics effects of such intervention in this market.
4. Compute the deadweight loss generated by the government intervention and the new producer surplus.
5. Instead of a price ceiling the government provides a subsidy of $5 to consumers, illustrate graphically the economics effects of this intervention.
6. Compute the deadweight loss and provide two examples of price ceiling and two examples of a subsidy to consumers in the real world.
The Affordable Health Care Act (Obama care) is an example of an indirect intervention by a government, explain the arguments behind this decision.
7. Assume that the government levied a $6 tax on the suppliers of mangoes. Illustrate graphically the different economics effects of the tax ( and compute the DWL and specify the tax burden ).
8. The government decides to impose a price floor of $44. Illustrate graphically the different economics effects of such intervention in this market.
9. Compute the deadweight loss generated by the government intervention and the consumer surplus.
10. Assume that the government levied a $4 tax on the consumers of mangoes. Illustrate graphically the different economics effects of the tax ( and compute the DWL and specify the tax burden
11. What are the characteristics of a perfect competitive market?
12. Compare and contrast the Washington Consensus to Beijing consensus.