Question

Suppose that supply and demand are given by and

?? = 20 − 2?

?? = ? − 7

A. Determine the equilibrium price and quantity

B. What are the inverse supply and demand functions?

C. What would the new inverse supply function b if there were a new ad valorum tax of 10 percent of the sales price payable by the supplier?

D. Draw by hand the shift in the supply curve (old and new supply curves) as well as the demand curve. You can use quantities from 0 to 3. You don't have to solve for the new equilibrium quantity and price after the supply shift.

E. In words, what happens to the equilibrium price and quantity. You just need to specify increases or decreases, not the exact numbers

Answer 1