3. (15pts total) Suppose the market supply curve is given by $Q_s = 40 + 30P_s$, and the market demand
curve is given by $Q_d = 400 - 15P_d$.
(a) (3pts) Solve for the equilibrium market price and quantity.
(b) (4pts) What is the consumer surplus in the market equilibrium?
(c) (4pts) Now suppose the government imposes a price ceiling of $10. What amount is traded in the
market (assume the government does not purchase excess supply)? Now what is the consumer
surplus?
(d) (4pts) Draw a clearly labeled graph with the market supply and demand functions, and the price
ceiling. Label the areas for the consumer surplus, the producer surplus and the dead weight loss
with the price ceiling.
4. (5pts total) Jeremy Lin has preferences over consumption (c) and leisure (l) given by:
$u(c, l) = c^{2/3}l^{1/3}$
