Posted: June 15th, 2022

Macquarie ECON 649 – Suppose that the market for milk is a competitive market

1.
Suppose that the market for milk is a competitive market and could be described
by the following demand and provide curves:
D
= 1,400 – 400P S = 400P – 200
The place
P = value per litre of milk
Calculate
the equilibrium value and amount of milk and draw a diagram for instance
your reply.
Calculate
the (i) producer surplus (ii) client surplus (iii) financial surplus and (iv)
deadweight loss if the market for milk operates at the equilibrium value and
amount.
Suppose
that the authorities imposes a value ceiling of $1 per litre of milk.
1. (i)
Illustrate the value ceiling on the diagram you drew in (a)
2. (ii)
How a lot milk is now bought in the market?
three. (iii)
Calculate the quantity of the surplus or scarcity of milk created by the
imposition of the value ceiling.
four. (iv)
Calculate the (i) producer surplus (ii) client surplus (iii) financial
surplus
and (iv) deadweight loss after the introduction of the value ceiling.
(v) Is society higher off following the
introduction of the value ceiling?
(vi) Are producers higher off following
the introduction of the value ceiling?
(vii) Are customers higher off following the
introduction of the value ceiling?

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