Suppose in a certain city the demand for low-cost housing can be characterized by the equation P = 500 - 2Q, where Q is housing measured in square feet. Further, suppose that supply is characterized by the equation: P = 25 + 3Q.
(A) How much consumer surplus is there?
(B) Suppose that a grant is given so that the supply of housing is increased. This increase
changes the supply curve to P = 3Q. How much does consumer surplus change because of
the grant?
(A) Setting supply equal to demand gives that Q* = 95 and P* = 310. Therefore, consumer
surplus is (1/2)(95)(190) = 9,025.
(B) Setting the new supply curve equal to the original demand curve gives Q* = 100 with P* =
300. Now consumer surplus is (1/2)(100)(200) = 10,000.
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In a market with asymmetric information, a good is said to have hidden characteristics if:
A) the consumption of the good imposes an additional cost on the society. B) the production of the good generates additional benefits to the society. C) the seller offers secret discounts to some buyers. D) the buyer or the seller observes something about the good that the other does not.
Suppose you observe that the price of a good increases and that the quantity of this good sold also increases. If only the demand curve or the supply curve shifts this suggests that
A) supply increased over time while demand remained the same. B) supply decreased over time while demand remained the same. C) demand increased over time while supply remained the same. D) demand decreased over time while supply remained the same.
If the government of a country decides to increase the required reserve ratio from 10 to 12.5 percent, the value of the money multiplier will: decrease from 10 to 8. a. increase from 1.0 to 1.2. b. decrease from 10 to 8
c. increase from 10 to 12. d. decrease from 12 to 10.
Which of the following is closest to the future value of an $800,000 deposit earning 2 percent interest annually after 20 years?
A. $1,188,758 B. $1,120,262 C. $1,176,224 D. $1,201,204