1. Suppose that the demand curve for plums is given by Z = 10-2p, where Z is the number of pounds demanded per year of plums and the price is p. a. Assume the price were $1. Find the total quantity demanded, the total amount spent, and calculate the consumer surplus. b. Now suppose that the government imposes a plum quota program (the PQP) so that plums now cost $2. Find the new quantity demanded, total amount spent, and total consumer surplus. What is the most consumers would be willing to sacrifice to get rid of the program (Hint: Think about the change in the consumer surplus and it means).

Explanation: The demand function is given as:

Z = 10-2p.

For A, we have:

Price = $1.

To find the total quantity demanded, we have:

Z = 10-2 (1)

Z = 10-2

Z = 8 pounds

To find the total amount spent, we have:

Z = 10-2p

Where:

Z = 8.

We have:

8 = 10-2p

2p = 10-8

2p = 2

p = $1

To find the consumer surplus, we have:

1/2 x Z x p

= 1/2 x 8 x 1

= 4.

For B, the price is $2. To fine the new quantity demanded, we have:

Z = 10-2 (2)

Z = 10-4

Z = 6.

Total amount spent is $2.

Consumer surplus is:

1/2 x Z x p

= 1/2 x 6 x 2

= 6.

To find the most consumers would be willing to sacrifice to get rid of the program, we calculate the change in consumer surplus, thus:

∆C. S = 6-4 = 2.