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Consider the following general demand and supply functions for a given commodity. Qd=a-bp Qd=-c+dp a. Find...

Consider the following general demand and supply functions for a given commodity.

Qd=a-bp

Qd=-c+dp

a. Find the equilibrium price and quantity [4 Marks]

b. Suppose that a fixed tax t is imposed on the product in question, what is the new equilibrium price and quantity. [6 Marks]

d. Express the value of t in terms of a, b, c, d, and p. [3 Marks]

e. Use iii. Above to write the expression for government revenue. [2 Marks]

f. Suppose that instead of a fixed tax, the government decides to set a non-binding price floor equal to λ. How many units will be supplied and how many units will be demanded to ensure optimal quantities? [5 Marks]

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