1. Consider a market whose supply and demand curves are given by P = 4QS and P=12- 2QD.
a) Calculate the equilibrium price and quantity (P* and Q*) assuming the market is unregulated. What is the total surplus at the equilibrium?
b) Suppose the government impose a price ceiling of Pc = $4. What is the quantity supplied at that price? What is the quantity demanded? Is this a shortage or a surplus? How large is it? (Also show it in diagram)
c) Indicate CS, PS and the deadweight loss of the market with the price ceiling of Pc = $4 in diagram.

Question

1. Consider a market whose supply and demand curves are given by P = 4QS and P=12- 2QD.
a) Calculate the equilibrium price and quantity (P* and Q*) assuming the market is unregulated. What is the total surplus at the equilibrium?
 b) Suppose the government impose a price ceiling of Pc = $4.  What is the quantity supplied at that price? What is the quantity demanded? Is this a shortage or a surplus? How large is it? (Also show it in diagram)
c) Indicate CS, PS and the deadweight loss of the market with the price ceiling of Pc = $4 in diagram.