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Consider the market for potatoes with inverse demand given by P=60-2*Q and inverse supply given by P=10+3*Q
Consider the market for potatoes with inverse demand given by P=60-2*Q and inverse supply
given by P=10+3*Q. Suppose the Price Ceiling is $25. Find the Deadweight Loss.
Formula to calculate this?
Expert Solution
Ceiling price= 25
Inverse supply;
P=10+3*Q
25= 10+ 3*Q
25- 10= 3*Q
15= 3*Q
Q= 15/ 3
= 5
Dead weight loss= 1/2* (P* Q)
= 1/2* 25* 5
= 62.5
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