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Q1. Assume that Demand and Supply are given by the equations Pd = 50 - 2Q...

Q1. Assume that Demand and Supply are given by the equations

Pd = 50 - 2Q

Ps = 10 + 1Q

Where prices are expressed in cents.

a. How would you modify the equations to represent a unit tax of 6 cents per unit?

b. Sketch the demand and supply curves and illustrate the effect of the tax?

c. Compute the deadweight loss due to the tax of 6 cents per unit?

d. What would happen to the DWL if the tax were increased to 12 cents per unit?

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