INDIVIDUAL ASSIGNMENT 1
Consider a market for bottled beverages where the demand and supply are given by the following
equations:
Demand: Qd=600−2P
Supply: Qs=4P
(Where P is the price in thousand VND per bottle, and Q is the quantity in bottles.)
Questions:
1. Calculate the equilibrium price and quantity. Support your answer with a supply and demand
graph.
2. Suppose the government imposes a tax of 10 thousand VND per bottle on sellers.
Find:
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The price that consumers pay
The price that sellers receive (after tax)
The quantity of goods sold in the market.
Show these outcomes on a new supply and demand diagram.
3. Suppose the government sets a price ceiling of 50 thousand VND per bottle.
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Is this price ceiling binding?
If so, calculate the quantity demanded, quantity supplied, and the resulting shortage in the
market.
Illustrate your answer with a diagram.
4. Suppose the government sets a price floor of 80 thousand VND per bottle.
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Is this price floor binding?
If so, calculate the quantity demanded, quantity supplied, and the resulting surplus in the
market.
Illustrate your answer with a diagram.