a. Before the Middle East war disruption of the Canadian gas market, what letters in the diagram represent:

• Total consumer surplus [CS]?
• Total producer surplus [PS]?
• Calculate the total dollar amount of economic surplus [ES-i.e. CS+ PS].

b. After the war disruption, but assuming a price ceiling is not put in place, what letters in diagram [b] represent lost CS?

• Calculate the total dollar amount of lost CS.

c. Assuming the federal government responds to the war disruption by imposing the $1.50 price ceiling, and that gas only trades at $1.50 [i.e. a black market for gas does not emerge, what letters represent

• CS?
• PS?
• Deadweight loss [DWL]?
• Calculate the total dollar amount of DWL.

Transcribed Image Text:

Price [dollars per litre] SArwa druption 2.50 A Seapre wor dioneption 2.00 B 1.75 Proposed price ceiling 150 M D 100 E K N Do 0.25 Quantity [millions of litres per month] 70 50 30 0 Price [dollars per litre] SArwa druption 2.50 A Seapre wor dioneption 2.00 B 1.75 Proposed price ceiling 150 M D 100 E K N Do 0.25 Quantity [millions of litres per month] 70 50 30 0

Answer rating: 100% (QA)

a Consumer Surplus before war L I H G A B C Producer Surplus be... View the full answer