Answer Happy

The inverse demand and supply functions for Peak Milk in Accra
are as follows: P = 100 – Q and Q = 1/3P – 20/3 where P is the
price of a tin of Peak milk.
Requirement:
a. Sketch the demand and supply functions on one graph.
b. Compute the market-clearing price and quantity for peak
milk.
c. Compute the consumers’ surplus and total surplus in this
market.
d. Suppose the cost of milking a cow rises such that at every
quantity, cost rises by GH¢20.00. How will that affect the
equilibrium price and quantity for peak milk?
e. If the Regional Minister of Great Accra argues that the
free-market price for peak milk is too high for the ordinary person
to pay. What’s the effect of a price ceiling at GH¢74.00 f. Another
Regional Minister contends that the equilibrium price is rather too
low for peak milk producers to earn a fair return. If his
contention is accepted, what will be the effect of a price floor of
GH¢86.00. g. What will be the cost to the government of the price
floor in (f) above?