Suppose demand for a good is Q_D = 100 - P and supply is Q_S= -20 + P.Suppose that a nationwide quota (of 20)is enforced so that more can be used in a war effort.What is the consumer surplus?

Question

Quizplus · Accepted Answer

The equilibrium price without the quota is found by setting QD = QS, which gives P = 60. The equilibrium quantity is 40. With a quota of 20, the price is 80 (from QD = 100 - P). Consumer surplus is the area of the triangle with base 20 (from 100 to 80) and height 20 (from 100 to 80), which is (1/2) * 20 * 20 = 200.

Suppose Demand for a Good Is QD = 100 -

Suppose Demand for a Good Is Q_D = 100 -