Suppose the Demand and Supply Curves for Units of University

question 33

Essay

Suppose the demand and supply curves for units of university credits are given by the following equations:
Q^D = 5,000 - P
Q^S = -1,000 + 4P
where Q^D is the quantity of credits demanded, Q^S is the quantity supplied, and P is the price charged for each unit in dollars. Suppose that the government wants to make education more accessible and therefore passes a regulation that says no university can charge more than $1,000 per credit. Calculate the deadweight loss associated with this price ceiling.

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Definitions:

Production Capacity

The maximum output that a business can produce in a given period with the available resources.

Process Reengineering

The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance.

Unnecessary Steps

Processes or actions within a workflow that do not add value to the product or service and could be eliminated to improve efficiency.

International Federation

A global organization or association that represents and governs a specific set of standards or interests across nations.