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Setting a quota - numerical Example


  1. 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.
  2. Use these figures to plot the supply and demand curves. What is the equilibrium price and quantity?
  3. The world price is $8, plot this on your supply and demand diagram.
  4. The government sets a quota for foreign firms of 15 units. Use your supply and demand diagram to illustrate the impact of this quota.
  5. Calculate the following:
    1. Domestic firm's revenue before and after the quota
    2. Overseas firm's revenue before and after the quota
    3. Consumer expenditure before and after the quota
  6. Evaluate the impact of the quota on overseas firms and consumers.

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