The supply and demand curves for bananas are as follows:        QD = 3,750 - 725P       QS = 920 + 690P              where Q = millions of bushels and P = price per bushel.   a) Calculate the equilibrium price and quantity that would prevail in the free market. b) The government has imposed a $2.80 per bushel support price. How much bananas will the government be forced to purchase? c) Calculate the change (gain/loss) in consumer surplus that would occur due to the support program. Does the consumer surplus increase or decrease under the program?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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The supply and demand curves for bananas are as follows: 

      QD = 3,750 - 725P

      QS = 920 + 690P             

where Q = millions of bushels and P = price per bushel.

 

a) Calculate the equilibrium price and quantity that would prevail in the free market.

b) The government has imposed a $2.80 per bushel support price. How much bananas will the government be forced to purchase?

c) Calculate the change (gain/loss) in consumer surplus that would occur due to the support program. Does the consumer surplus increase or decrease under the program? 

 

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