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Suppose That a Local Government Has Imposed a Quota of 0.5

Question 31

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Suppose that a local government has imposed a quota of 0.5 million gallons on water usage. Before the quota is enforced, the market demand curve is:
QD = 10 - 2.25P
and the market supply curve is:
QS = -10 + 2.75P
where the quantity is measured in millions of gallons per month and the price is in dollars per thousand gallons. Suppose that a local government has imposed a quota of 0.5 million gallons on water usage. Before the quota is enforced, the market demand curve is: Q<sup>D</sup> = 10 - 2.25P and the market supply curve is: Q<sup>S</sup> = -10 + 2.75P where the quantity is measured in millions of gallons per month and the price is in dollars per thousand gallons.

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