Question

2. Assume that demand and supply for a product over a period of time, respectively, are:

Q^{d}_{x} = 15 – 0.5P_{x} and
Q^{s}_{x} = 0.25P_{x} – 3.

A. Calculate the equilibrium price and quantity. Clearly show your steps and manual calculations.

B. Quantify and discuss the impact of imposing a price of $20 per unit on the market, including the full economic price paid by consumers. Clearly show your steps and manual calculations.

C. If government should impose a $8 excise tax on the product, determine the new equilibrium price and quantity. Clearly show your steps and manual calculations. Graphically illustrate your answer.

D. Calculate the amount of tax revenue that government would earn with $8 excise tax. Clearly show your steps and manual calculations.

Answer #1

Assume that the demand for a product X is:
Qdx = 4,500 – 0.5Px +
Py – 6Pz + 0.05M,
where Px is unit price of product X,
Py is unit price of product Y,
Pz is unit price of product Z, and
M is average income of consumers of product X.
Determine the size of the consumer surplus at $10,500 per unit
price of X. Clearly show your steps and manual calculations.
Py = $4,760
Pz = $85
M...

Suppose the demand and supply curves for a large specialty
pizza are given by:
Qd = 120 – 10P
Qs = -30 + 5P.
Using the demand and supply functions above, the equilibrium
price of a pizza is ____, and the equilibrium quantity is ____.
Illustrate your answer.
Compute Price elasticity of demand and supply at this
equilibrium.
Compute CS and PS and illustrate on a graph.
Suppose that the government decrees that a specialty cannot be
sold above $8....

Assume that the estimated demand function for a product X
is:
ln Qxd = 9 –
1.25 ln Px + 3.5 ln Py + 0.85 ln M + ln A
where Qxd is quantity demanded of product
X,
Px is unit price of product
X = $21,
Py is unit price of another
product Y = $7.50,
M is average income of consumers of
product X = $52,500, and
A is advertisement cost for product X
= $425.
A. Clearly...

The demand function for a product is given by p=80-0.5Q and the
supply function is p=50+0.25Q, where p is the price and Q is the
quantity. Suppose that the government impose a tax of $15 on every
unit sold.
a) Find equilibrium price and quantity before imposing the
tax.
b) Find price of buyer and seller and the quantity sold in the
market after tax.
c) Find the tax burden on buyer and seller.
d) Find government revenue and deadweight...

Consider the following US reduced supply and demand equations
for commodity X: QdX = 400 – 2Px and QsX = - 100 + 3Px A.
What are (1) the equilibrium price per unit of product;
(2) Quantity of this product sold at this price;
and (3) what were the revenue for the producers?
B. If this product can now be export to a make-believe country
and the estimated reduced demand equation for this product in this
make-believe country is :...

Assume that the quarterly demand for an SUV produced by an
automobile company is Qd = 150,000 – 1.5P, where Qd is quantity
demanded and P is price per vehicle.
A. Using the concept of elasticity of demand, what price should
be charged to maximize revenue from sales of this SUV? Clearly show
your steps and manual (hand and calculator) calculations.
B. Derive the equation for total revenue for this product.
Clearly show you steps.
C Using (b) above, determine...

The equations for the demand and supply curves for a particular
product are P = 10 - .4Q and P = 2 + .4Q respectively, where P is
price and Q is quantity expressed in units of 100. After an excise
tax is imposed on the product the supply equation is P = 3 + .4 Q.
a- Compute equilibrium price and quantity before and after tax.
b-Calculate government's revenue from this tax. C- Calculate share
of producers and consumers...

The demand function for a product
is QdX = 1000 – 10
Px and its supply function is
QsX = 100 + 2
Px
Calculate the equilibrium price and equilibrium quantity of the
good.
a.
75; 250
b.
90; 100
c.
70; 200
d.
100; 100
If the value of the price elasticity of X is 0.45, then a price
decrease of X will
a.
decrease revenues for the suppliers of X
b.
increase revenues for the suppliers of X
c.
will...

Let the market demand curve be QD=8-P
and the market supply curve be QS=P. Let
price P be measured in $/unit and let quantity Q
be measured in singular units (i.e. simple count).
Solve for the equilibrium price P* and
quantity Q*.
Now, assume the government imposes a $2/unit tax on consumers,
which leads to wedge/gap between the buyers’ price
Pb and the sellers’ price
PS.
Rewrite the demand and supply curves using Pb
and PS, respectively.
Write down the...

Suppose that, in the market for soda drinks, demand is given by
P= 48 – 0.6Q, and supply is given by P= 0.2Q. Further, suppose that
the government decides to impose a $4 per soda drink.
A. On a graph, demonstrate the effect of the tax on the
equilibrium price and quantity. (Clearly label the value of each
both before and after the tax.)
B. Show on the graph and calculate the tax revenue and
deadweight loss that result from...

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