Economics questions

timer Asked: Nov 19th, 2014

Question description

Suppose that the demand for a good is given by Qd=381-3P and its supply is given by Qs=5+7P. The government announces a price ceiling by making it illegal to sell this good for a price above $32 per unit. 

1) Calculate the shortage that would result from the price ceiling.

2) Now assume that the government wants to avoid shortages and decides to pay the sellers a sufficiently hight subsidy that will eradicate the shortage. Calculate the amount of the subsidy required to achieve this goal.

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