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. )

Question

Business

Amelie Roberson

11 August, 11:33

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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Answers (1)

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Cha Cha · Answer 1

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