Answer to Question #319688 in Microeconomics for gaurav

Question

The statistics department of an appliance manufacturer has estimated that the demand function for their brand (brand X) automatic washer (number purchased annually) is as follows:

Q_X=197,000-100P_X+50P_Y+0.1Y+0.02A+10,000P_L

D. Determine the consumer and producer surplus given equilibrium condition. What is the most that consumers would be willing to pay for 100,000 of brand X automatic washer?

E. Suppose that the government imposes a price ceiling for this washer valued at $800.

How large is the shortage?

Deadweight loss to society?

Determine the full economic price consumers have to bear because of the price ceiling.

Determine the new consumer and producer surplus.

Answer 1

Qx- quantity purchased,

Px-price of the company's washer,

Py-price of a major competitor's washer,

I-average household income,

A-annual dollars spent on advertising

PL-cost of doing one load of wash in self-service laundry.

Assuming that

Py=$300,

I=$40,000,

A=$200,000

P =$.30

Py=$350

P =$400