How consumer surplus and producer surplus in a figure and

Question

1. A new chemical cleaning solution is introduced to the market. Initially, demand is

Q_D = 1,000 - 2 p and supply is Q_S = 100 + p.

a) Determine the equilibrium price and quantity.

b) Show consumer surplus and producer surplus in a figure and calculate the value of consumer surplus and producer surplus.

The government then decides that no more than 300 units of this product should be sold.

c) Show in a graph how this policy affect the equilibrium price and quantity.

d) Calculate the new equilibrium price and quantity.

e) Show consumer surplus and producer surplus in a figure and calculate the value of consumer surplus and producer surplus under the government policy.

f) How does the policy affect consumer welfare (measured by consumer surplus) and producer welfare (measured by producer surplus)?

2.) The price elasticity of demand for gasoline is estimated to be -0.2. Two million gallons are sold daily at a price of $3. Use this information to calculate a demand curve for gasoline assuming it is linear.