The Reinheitsgebot is a set of laws established in the 1600s that regulate the production and sale of beer in Germany. Among its provisions, the edict set maximum prices that brewers could charge at various times of the year: "From Michaelmas to Georgia, the price for one [Bavarian Liter] is not to exceed one Pfennig Munich value." Cheap beer — this must be a great thing for consumers. Suppose that the demand for beer is given by Q^D=7,000−1,800P , and the supply of beer is given by Q^S=−1,000+2,100P.

1. Accurately graph the demand, supply and price ceiling curves.

2. Without the price ceiling of 1-Pfennig.

a. What is the equilibrium price of beer?

b. What is the equilibrium quantity of beer?

c. What is the producer surplus?

d. What is the consumer surplus?

3. With the price ceiling of 1-Pfennig.

a. What is the producer surplus received by beer producers after the price ceiling is imposed?

b. What is the consumer surplus received by beer producers after the price ceiling is imposed?

4. After the price ceiling is imposed, beer drinkers see their surplus.

Answer rating: 100% (QA)

1 Graphing the demand supply and price ceiling curves The demand curve QD70001800P slopes downward f... View the full answer