Social efficiency. Show your work in all parts of this question. Suppose that a market is described by the following supply and demand equations: QS = 2P [where QS is quantity supplied, and P is price] QD = 300 – P [where QD is quantity demanded and P is price]
1. Solve for equilibrium price and equilibrium quantity
2. Draw the demand and supply curves represented by the equations above and indicate the equilibrium values (price and quantity) on your graph.
3. Calculate the total surplus (sum of consumer surplus and producer surplus) at the market equilibrium.
4. Now suppose the government sets a price floor (minimum price) at $200.
i. What is the total surplus at this new price of $200?
ii. Calculate the efficiency loss (deadweight loss) resulting from the price floor