Covid 19 has had a dire effect on global economies economic...

COVID-19 has had a dire effect on global economies. Economic activity has shrunk dramatically, and with it, the food supply value chain globally. The following are the demand and supply functions for the macro-food market in the Nigerian economy. Q_D = 200,000 - 4,000P Q_S = 20,000 + 2,000P Equilibrium price is $30, and equilibrium quantity is 80,000 units. a. If the government implements a price ceiling of $20 on the price of food, what is the level of constrained supply now? b. What is the non-pecuniary price? c. Calculate the level of consumer surplus after the ceiling has been introduced. d. Are all consumers better off after the policy? Justify intuitively or mathematically.

Transcript

00:01 So again here the question is given in four parts.

00:04 So the part a for solving it we need to find that given things that is quantity demanded which is equals to 2 lakh minus 4000 p.

00:19 Okay and quantity supplied is equals to 20 ,000 plus 2000 p here price ceiling we have to given is equals to $20.

00:38 $2 so to find the constraint supply we need to equate both these equations now 2 lakh minus 4000 p is equals to 20 ,000 plus 2000 p now solve for p we got when we solve for p we got here 2 lakh minus 20 ,000 is equals to 2000 p plus 4000.

01:16 So here what we got we got 6000 p is equals to 1 lakh 80 ,000 for solving p we got 1 lakh 80 ,000 divided by 6 ,000.

01:34 So here when we solve it we got $30.

01:40 Okay.

01:41 So now here we can say that even with the price ceiling of $20 the price remains at the equilibrium price.

01:48 That is $30.

01:49 So it indicates there is no constraint supply.

01:59 Okay, so it is a final answer for this part.

02:05 Now, let's talk about the part b.

02:09 So here we can say that the non -penetrative price it refers to the cost or sacrifice other than the monetary term other than monetary terms.

02:28 The consumer has to be here.

02:30 Okay in this case with the price ceiling of 20 we know the price ceiling is 20 roller the non -penetrative price could be the time spent waiting in line.

02:43 Okay time spent waiting in line or any other inconvenience inconvenience beer or associated by the beer by the consumer, which is associated with the limited supply of food due to the price constraint or the price ceiling.

03:10 So these are the what these are the non -penetrate prices in this case.

03:17 Now, let's talk about the next point here.

03:20 We have to calculate the level of consumer surplus here.

03:24 The given things are quantity demanded.

03:27 That is equals to again 2 lakh minus 4000 p price ceiling.

03:37 Again is it equals to $20 and equilibrium quantity.

03:44 We can represent it by qe...