Unit 4 Government Intervention Paper

3 Calculating the Effect of a Price Ceiling

Given the following Supply/Demand Function:
Qd = 250 4P
Qs = -50 + 5P
1. Calculate the Price and Quantity equilibrium.
2. Calculate the Price and Quantity intercepts for the Demand
function.
3. Calculate the Price intercept for the Supply function.
4. Graph the Supply and Demand function.
The Government intervenes in the marketplace and places a
Price on Rice of $20 per unit.
1. Illustrate the Price Floor on your existing graph.
2. Show and calculate the excess supply/demand in the market
place.
3. Is the Price Floor effective? Why/why not?
Consumer/Producer Surplus and Total Welfare Loss
1. Calculate the Consumer Surplus with no Government
Intervention.
2. Calculate the Producer Surplus with no Government Intervention.
3. Calculate the Consumer Surplus with Government Intervention.
4. Calculate the Producer Surplus with Government Intervention.
5. Calculate the Total Welfare Loss with Government Intervention.