Unit 4 Government Intervention

Price Floor - Paper 3 Calculations

Given the following Supply/Demand functions for rice:
Qd = 100 - 5P
Qs = -50 + 10P
1. Calculate the Price and Quantity equilibrium.
2. Calculate the Price and Quantity intercept for the Demand
function.
3. Calculate the Price intercept for the Supply function.
4. Graph the Supply and Demand function.
The Government intervenes in the marketplace and places a
Price Ceiling on Rice of $15 per unit.
1. Illustrate the Price Ceiling on your existing graph.
2. Show and calculate the excess supply/demand in the market
place.
3. Is the Price Ceiling effective? Why/why not?
The Government agrees to purchase the excess supply in the
marketplace.
1. How much will it cost the Government?
2. Calculate the new Demand function when the government
purchases the excess supply.
Consumer/Producer Surplus and Total Welfare Loss
1. Calculate the Consumer Surplus with no Government
Intervention.
2. Calculate the Producer Surplus with no Government Intervention.
3. Calculate the Consumer Surplus with Government Intervention.
4. Calculate the Producer Surplus with Government Intervention.

Unit 4 Government Intervention

Price Floor - Paper 3 Calculations
5. Calculate the Total Welfare Loss with Government Intervention.