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Domestic Demand and Supply PDF

   

Added on  2020-12-10

6 Pages1136 Words122 Views
Economics

Table of ContentsQuestion 1: The marginal private benefit and (demand) and marginal private cost (supply) ofeducation in China are described by ...............................................................................................3Question 2: ......................................................................................................................................4Question 3: Consider the apples in a small country. Domestic demand and supply is given by ....5When government allows for international trade then equilibrium state changes from 6 units to 5units. Therefore, equilibrium price decreases with increases in quantity. Under this condition,winners are international companies who purchase apples on low price and sell it on high price.While looser will be domestic country and buyers. .......................................................................6

Question 1: The marginal private benefit and (demand) and marginal privatecost (supply) of education in China are described by P = 100 – 0.1 QDP = 10 + 0.1 QSa) Calculate the market equilibrium quantity and price of educationSolution: At equilibrium condition, Quantity of demand = Quantity of supplyQD = QS(100 – P) * 10 = (P – 10) * 102P = 110P = 55Therefore, price of education is $55. Market equilibrium quantity, (100 – P) * 10 = (100 – 55) * 10 = $450 Henceforth, Equilibrium Price = $55Equilibrium Quantity = $450b) Calculate marginal private benefit and marginal cost diagram Price of education ($) Market demand ($)Market supply ($)1585050257501503565025045550350554504506535055075250650Demand CurveSupply Curvec) An economist has estimated that consumption of education generates a positive externality of$10 a unit. Calculate the social optimum and deadweight loss.3

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