1. Market demand function is given by Qd = 180 - 2P, and a Market supply function is given by Qs = 15 + P. The market is government-regulated with a price support per unit and production quotas. If the price is set at $72 per unit, what production quota is needed to make sure there are no shortages or surpluses?

Considering the price support and the quota, what is the:

• the consumer surplus?
• the producer surplus?
• the deadweight loss?

a. Due to good weather conditions, there is an increase in the demand for the good. The new demand equation is Qd = 190 - 2P. The government is trying to decide between two options:

• Maintain the number of quotas and let the market adjust, or
• Maintain the price support and increase the number of quotas.

Suppose that the government decides to maintain the number of quotas and let the market adjust, what is:

• The price observed in the market?
• The consumer surplus?
• The producer surplus?
• The deadweight loss?

b. Suppose the government decides to increase the number of quotas available to 72 units but it keeps the price support at the current level of $72, what is:

• The consumer surplus?
• The producer surplus?
• The deadweight loss?

c. Which of the government options in 1a. will be preferred by:

• The Producers?
• The Society?