(24 points) Suppose the market for sweetened beverages (e.g, cola) in a county can be summarized...
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(24 points) Suppose the market for sweetened beverages (e.g, cola) in a county can be summarized by the following demand and supply relationships: a. where Q = number of cases per week; P = price per case ($) Determine and illustrate the market equilibrium price and quantity for this good, along with the Consumer Surplus (CS), Producer Surplus (PS) and Total [Marshallian] Surplus (TS). (8 points) b. QD C. = 6000-400P QS = 200P Now assume the local government establishes a price floor (minimum price) of (i.e., excise tax) of $12 per case. Determine and illustrate the market impact of this price floor. (8 points) Ignoring the price floor part b., assume the market demand function changes to: Q = 4800 400 P (the supply function remains as QS = 200P. Determine and illustrate the new market equilibrium price and quantity. Explain may have caused this change in the market. (8 points) (24 points) Suppose the market for sweetened beverages (e.g, cola) in a county can be summarized by the following demand and supply relationships: a. where Q = number of cases per week; P = price per case ($) Determine and illustrate the market equilibrium price and quantity for this good, along with the Consumer Surplus (CS), Producer Surplus (PS) and Total [Marshallian] Surplus (TS). (8 points) b. QD C. = 6000-400P QS = 200P Now assume the local government establishes a price floor (minimum price) of (i.e., excise tax) of $12 per case. Determine and illustrate the market impact of this price floor. (8 points) Ignoring the price floor part b., assume the market demand function changes to: Q = 4800 400 P (the supply function remains as QS = 200P. Determine and illustrate the new market equilibrium price and quantity. Explain may have caused this change in the market. (8 points)
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a Market Equilibrium without Price Floor Set QD quantity demanded equal to QS quantity supplied 6000 ... View the full answer
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