Consumer Surplus, Producer Surplus, Deadweight Loss, Price Control Consider the market for electricity in an island country. The price (P) is given in dollars per kilowatt hour (kWh) and the quantity (Q) is measured in kilowatt hours (kWh).
Demand and Supply equations for the electricity are as follows:
Market Demand: P = 10 - Qd
Market Supply: P = 2 + Qs
Assume that during the past summer, because of the record-breaking heat, the government set a price ceiling in the market for electricity at 7 dollars per kWh. Is there a shortage or a surplus in the market once the price ceiling is set?
