Question

Look at the tables below, which show, respectively, the willingness to pay and willingness to accept of buyers and sellers of bags of oranges. For the following questions, assume that the equilibrium price and quantity will depend on the indicated changes in supply and demand. Assume that the only market participants are those listed by name in the two tables.
Person Max Actual
bob 13 8
barly 12 8
bill 11 8
bart 10 8
brent 9 8
betty 8 8

Person Minimum Actual
carlos 3 8
courtney 4 8
chunk 5 8
cindy 6 8
craig 7 8
chad 8 8

Required:
a. Given that the equilibrium price is $8, what is the equilibrium quantity given the data displayed in the two tables?
b. What if, instead of bags of oranges, the data in the two tables dealt with a public good like fireworks displays? If all the buyers free ride, what will be the quantity supplied by private sellers?
c. Assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a $2-per-bag tax on sellers. What is the new equilibrium price?

Answer 1

Answer and Explanation:

a. The equilibrium quantity for the given two tables is

As if the equilibrium price is $8 so the six consumers i.e bob, barly,bill,bart, brent, betty) are paying more than the equilibrium price and on the other hand six producers (carlos, courtney, chunk, cindy, craig, chad) are accepted the price as the equilibrium price is more than the accepted price

Hence, the equilibrium quantity is 6

b. Now if all the buyers are free to ride so the quantity supplied by private sellers is 0 as the minimum accepted price is more than the willingness price as producers is not able to produced

c. At imposing $2 per bag tax on sellers, the new equilibrium price is $9 as the price rise to $9