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22 January, 20:10

Consider the market for wheat where demand is given by: Upper Q Superscript d Baseline equals 80 minus 2 p and supply is given by: Upper Q Superscript s Baseline equals 40 plus 1 p. Now suppose that, due to a market failure (an artificial shipping constraint), a maximum of 43.34 units of wheat can be supplied by firms in the market. (p = The amount of the deadweight loss caused by the market failure is $ nothing. (Enter your answer rounded to the nearest penny and as a positive number. )

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  1. 22 January, 20:32
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    The market for wheat is calculated as follows:

    Explanation:

    Setting QD = QS

    100 minus 4P = 40 plus 4P

    100 minus 40 = 4Pplus4P

    60 = 8P

    P = 60/8 = 7.5

    Q = 100 minus 4 (7.5) = 70

    When supply = 65

    Price at which consumers would demand

    65 = 100 minus 4P

    4P = 100 minus 65

    P = 8.75

    Price at which producers would supply

    65 = 404P

    65 minus 40 = 4P

    P = 6.25

    DWL = 0.5 into (8.75-6.25) into (70-65)

    = 6.25
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