30 Apr Question: Solve 12.13 12.13 More on the comparative statics of supply and demand The supply and…
solve 12.13
12.13 More on the comparative statics of supply and demand
The supply and demand model presented earlier in this chapter can be used to look at many other
comparative statics questions. In this problem you are asked to explore 3 of them. In all of
these, quantity demanded is given by D(P,α) and quantity supplied by S(P,β).
- Shifts in supply: calculate dP*/dβ and dQ*/dβ. Be sure to calculate your results in both derivative and elasticity terms. Also describe with some simple graphs
A quantity “wedge”: In our analysis of the imposition of a nut tax we showed how much such a tax wedge can affect equilibrium price and quantity. A similar analysis can be done for a quantity wedge for which, in equilibrium, the quantity supplied may exceed
- the quantity demanded. Such a situation might arise, for example, if some portion of production were lost through spoilage or if some portion of production were demanded by the government as a payment for the right to do business. Formally, let Q be the amount of the good lost. In this case equilibrium requiresD(P) = Q and S(P) = Q + Q.
Us the comparative statics methods developed in this chapter to calculate dP*/dQ and
dQ*/dQ. [In many cases it might be more reasonable to assume Q = 𝛿Q (where 𝛿 is a small decimal value). Without making any explicit calculation, how do you think this case would differ from one you explicitly analyzed?]
The demand and supply functions are given at the top, D & S, there are no actual functions. this is an abstract problem. If you do not understand please stop commenting and leave for someone else to answer.
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