Please answer thuroughly and with clear handwriting Problem Set #4 (In-Class) Se
ID: 1115300 • Letter: P
Question
Please answer thuroughly and with clear handwriting
Problem Set #4 (In-Class) September 21, 2017 Instructions: Answer all of the questions below. Each response must be written legibly on sheets of paper. Be sure to aim for conceptual clarity and concision, and appeal correctly to the relevant economic principles/theory 1. Suppose the market for economics textbooks at Morehouse College is as follows Quantity of Books Supplied (Qs) -100 -87.5 -85 -82.5 Quantity of Books Demanded (QD) 60 60 60 60 Price of Books (P) a. At what price and quantity is this market for economics textbooks in equilibrium? b. Suppose out of a concern for the financial burden faced by students purchasing textbooks, Morehouse administrators are able to implement and enforce a fixed price for economics textbooks at $50. What are the effects of this in the market for text books? Are Morehouse students better-off or worse-off? Why?Explanation / Answer
a)Qs=-100+2.5P
And Qd=60
Thus equilinrium is at a point where Qs=Qd
60=-100+2.5P
P=160/2.5=64
B)when price=50 then Qs=-100+2.5(50)=25 and qty demand=60
Thus there will be excess demand of 35.
Morehouse overall student are worseoff becasue the consumer surplus decreases but some students are better off who gets the book because they pay lower price.