Setting a quota - numerical Example
- If the demand function is Qd = 150-5P and the supply function is Qs = -15+10P, calculate the figures for quantity demanded and quantity supplied for prices from $1 to $20.
- Use these figures to plot the supply and demand curves. What is the equilibrium price and quantity?
- The world price is $8, plot this on your supply and demand diagram.
- The government sets a quota for foreign firms of 15 units. Use your supply and demand diagram to illustrate the impact of this quota.
- Calculate the following:
- Domestic firm's revenue before and after the quota
- Overseas firm's revenue before and after the quota
- Consumer expenditure before and after the quota
- Evaluate the impact of the quota on overseas firms and consumers.