Question

Consider a market for cell phones. The demand and supply are defined by P = 400 -10 q, and P = 100 + 2q

Suppose now that the government requires each seller to pay a 60 tax for each cell phone. Compute the change in consumer surplus, change in producer surplus, the tax revenue, and the deadweight loss in the new equilibrium.

Suppose now that the government does not tax the seller, but instead the buyer to pay a $60 tax for each cell phone. What is the equation for the new demand curve? Compute the new equilibrium quantity, the price buyers pay, and the price sellers receive.

Answer 1

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