Applying price elasticity: U.S. sugar quotas  

    Use the letters and numerical values from the diagram to the right to help you complete the information in the table below.
    Sus = the supply curve of domestic producers
    Srow = the free-trade supply curve by the "rest of the world" (ROW), showing that we can buy as much sugar as we please at the going world price
    Sus+q = the supply of domestic producers plus the quantity allowed in under the quota (q).
 

Comparing the quota to free trade, indicate the areas in the diagram corresponding to:
    the change in U.S. consumer surplus: _________
    the change in U.S. producer surplus:  _________

Suppose that between the free-trade and quota price the arc own-price elasticity of demand for sugar is 0.35. Use this information to calculate actual numerical answers to each of the following:
    quantity of sugar consumed under free trade (C in the diagram): _________ billion pounds
    (Hint: use the arc-elasticity formula and rearrange terms to solve for C.)
    change in consumer surplus caused by the quota: $_________ billion dollars