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Cae Econ

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Submitted By fedorisima
Words 492
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CAE 3
a) As we have to find the market equilibrium we must equal both functions.
P=500-0’1QD

P=500-0’1QD

P=50+0’05QS

500=0’1QD

500-0’1Q=50+0’05Q

Q= 500/0’1

-3/20Q= -450

QD=5000

Q=-450/(-3/20); QE=3000
P=500-0’1·3000
PE=200
(Graphically represented in the end)
b) ԐPD=-(P/Q)· Variation
ԐPD=-200/3000· (-10)
ԐPD=2/3

ԐPS=-(P/Q)· Variation
ԐPS=-200/3000· (-20)

ԐPS=4/3
c) The first situation the government proposes is to fix a Price floor of 100€.

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P=500-0’1QD

P=50+0’05QS

100=500-0’1QD

100=50+0’05QS

-400/-0’1=QD

50/0’05=QS

QD=4000

QS=1000

QD-QS=4000-1000=3000 so it’s a shortage.
The next situation the government proposes is to fix a Price floor of 300€.
P=500-0’1QD

P=50+0’05QS

300=500-0’1QD

300=50+0’05QS

-200/-0’1=QD

250/0’05=QS

QD=2000

QS=5000

QD-QS=2000-5000=-3000 so it’s a surplus.

The next situation the government proposes is to fix a Price ceiling of 100€.
P=500-0’1QD

P=50+0’05QS

100=500-0’1QD

100=50+0’05QS

-400/-0’1=QD

50/0’05=QS

QD=4000

QS=1000

QD-QS=4000-1000=3000 so it’s a surplus.

The next situation the government proposes is to fix a Price ceiling of 300€.
P=500-0’1QD

P=50+0’05QS

300=500-0’1QD

300=50+0’05QS

-200/-0’1=QD

250/0’05=QS

QD=2000

QS=5000

QD-QS=2000-5000=-3000 so it’s a shortage.

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The next situation the government proposes is to fix a tax of 75€ per unit sold.
QD=QS
QD=(500-1(P+75))/0’1
QS=(P-50)/0’05
So P=175 and Q=2500
d)Graphic representations:
Market equilibrium:

Price floor 100 and 300€

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Price ceiling 100 and 300€

Tax of 75€ per unit sold

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