Suppose that the demand curve for a restaurant chain’s new burger is given by P = 10 – 2Q3 and supply is P = 5 + 0.5Q3 where price is in dollars and quantity is in hundred thousands of burgers.
a. Find the equilibrium price and quantity.
b. Calculate the consumer and producer surplus at the equilibrium price.
c. Suppose that due to pressure from groups campaigning for increased availability of restaurant food for the poor, the federal government sets a price ceiling of $5.50. Calculate the new consumer and producer surplus.
d. Calculate the deadweight loss associated with the price ceiling regulation.