133k views
5 votes
onsider the market for purple potatoes below and assume that a price ceiling of $30 is imposed by the government. Calculate the deadweight loss:

User Flypenguin
by
4.4k points

1 Answer

4 votes

Answer:

Deadweight loss is $5000

Step-by-step explanation:

Calculation to determine what deadweight loss is

First step is to calculate the Change in quantity

Change in quantity =2500-2000

Change in quantity=500 unit

Now let determine the Deadweight loss

Using this formula

Deadweight loss =0.5* Change in quantity *(Willingness to pay at the price ceiling -Price ceiling)

Let plug in the formula

Deadweight loss =0.5*500*(50-30)

Deadweight loss=250*20

Deadweight loss =5000

Therefore the deadweight loss is $5000

User LowCool
by
4.2k points