2019 Nov (Linear Demand Slope of Supply Output/Costs/Revenues Consumer Surplus) Paper 3 HL

2019 Nov 

(Linear Demand, Slope of Supply, Output/Costs/Revenues, Consumer Surplus) 

Paper 3 HL

(c) (i) Determine the slope of the market supply function for corn farmers in Nissos.

(ii) Calculate the monthly equilibrium quantity of corn in Noissos.

Equlibrium is where Qd = Qs

1. Find Price

10 - 0.5P = -2 + P

add +2 to each side

12 - 0.5P = P

add +.5P to each side

12 = 1.5P

P = 8

2. Insert P = 8 and solve Qd

Qd = 10 - 0.5P = 

10 - (0.5 (8)) = 

10 - 4 = 6

Qd = 6m at a Price of $8

3. Insert P = 8 and solve Qs

Qs = -2 + P = 

-2 + 8 = 6

Qs = 6m at a Price of $8

4. Q = 6 million

(d) (i) Plot and label Figure 1 the market demand curve and the market supply curve for corn in Nissos.

Qd = 10 - 0.5P

Step 1 - Make Qd/Qs zero and solve

Step 2 - Make P zero and solve

Step 3 - Plug in a number and solve

(ii) Draw and label the margonal revenue (MR) curve for corn for an individual farmer in Nissos on the grid below.

Understand that Perfectly Competitive firms have horizontal MR curves 

and they produce at Profit Maximization which is where the MR = MC.

(iii) Using Figure 1, calculate the consumer surplus in Nissos at the market equilibrium.

.5 x 6 (20 - 8) = $36m

1/2 x (6 x 12)

Area of Triangle = 1/2 (Base x Height)

2019 May (World Price, Consumer Surplus) Paper 3 HL

2019 May (World Price, Consumer Surplus) Paper 3 HL

Due to increased awareness of the possible health benefits of vitamin C, the demand for oranges in Country Z increases by 60,000 per month at each price.

 

(d) Calculate the change in expenditure on imported oranges as a result of the increase in demand.

Old Imported Amount = 40,000

New Imported Amount after Change in Demand = 100,000 at $2 price

Change in Demand = 60,000

 

Change in expenditure = 60,000 x 2 = $120,000

(e) (i) Calculate the change in consumer surplus in Country Z as a result of the increase in the demand for oranges.

(ii) Calculate the change in social (community) surplus as a result of the increase in the demand for oranges.

Change on Producer Surplus = 0

Change in Consumer Surplus = 78,000

Change in Community Surplus = Change in CS + Change in PS = 78,000

 

(f) State one administrative barrier that Country Z could use is order to restrict imports.

 

·Requirements for packaging/labeling

·Health/safety inspection procedures

·Changes in permitted specifications for a product

·Increased bureaucracy