1. Consider the market for burritos in a hypothetical Canadian city, blessed with thousands of hungry students and dozens of small burrito stands. The demand and supply schedules are shown in the table.


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a. Graph the demand and supply curves. What is the freemarket equilibrium in this market?


b. What is the dollar value of the total economic surplus in this market in the free-market equilibrium? What area in your diagram represents this economic surplus?


c. Suppose the local government, out of concern for the students’ welfare, enforces a price ceiling on burritos at a price of $1.50. Show in your diagram the effect on price and quantity exchanged.


d. Are students better off as a result of this policy? Explain.


e. What happens to overall economic surplus in this market as a result of the price ceiling? Show this in the diagram.

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