Question

Suppose that the demand equation: P = 6 – Q and supply equation: P = Q.

a. Calculate the price elasticity of demand at
equilibrium.

b. Calculate the equilibrium price and quantity, and consumer
surplus and producer surplus.

c. Suppose government imposes a unit tax of $1 on producers. Derive
the new supply curve and also calculate the new equilibrium price
and quantity.

d. Calculate tax revenue and the deadweight loss of this tax.

Answer #1

A.1. a. Suppose the demand function P = 10 - Q, and the supply
function is: P = Q, where P is price and Q is quantity. Calculate
the equilibrium price and quantity.
b. Suppose government imposes per unit tax of $2 on consumers.
The new demand function becomes: P = 8 – Q, while the supply
function remains: P = Q.
Calculate the new equilibrium price and quantity. c.
Based on (b), calculate the consumer surplus, producer surplus, tax...

Using the following information to calculate a)-n). Demand: P =
45- ½ Q Supply: P = 2Q
a) P*=_________
b) Q*=_________
c) Initial Consumer Surplus=__________
d) Initial Producer Surplus=__________
e) Total Surplus =_________________
Now the government imposes a $15 per unit tax on consumers.
Calculate the following.
f) Tax Distorted Competitive Equilibrium Quantity=_____
g) Price (consumers pay with tax)=________
h) Price (producers get with tax)=________
i) Consumer surplus with tax=_________
j) Producer surplus after tax=__________
k) Tax Revenue=_____________
l) Total...

Suppose the demand curve for a good is Q =9 −pand the supply
curve is Q =2p. The government imposes a specific tax of =1 per
unit. What would be the equilibrium? What effect does the tax have
on consumer surplus, producer surplus and deadweight loss?

The demand for skateboards in Vermillion is Q = 500−2P and the
supply curve is Q = 1/2 P. The government 2
decides to raise revenue by taxing consumers $25 for each
skateboard purchased.
(a) Graph the supply and demand curves and calculate the
consumer and producer surplus that would exist if there were no tax
in the market.
(b) Show how the tax will change the market equilibrium price
and quantity. Identify the price paid by consumers and the...

Suppose that the demand curve for wheat is Q=100−10p and the
supply curve is Q=10p. The government imposes a price ceiling of
p=3
i) Describe how the equilibrium changes. ii) What effect does
this price ceiling have on consumer surplus, producer surplus, and
deadweight loss?

The market for apples is perfectly competitive, with the market
supply curve is given by P = 1/8Q and the market demand curve is
given by P = 40 – 1/2Q.
a. Find the equilibrium price and quantity, and calculate the
resulting consumer surplus and producer surplus. Indicate the
consumer surplus and producer surplus on the demand and supply
diagram.
b. Suppose the government imposes a 10 dollars of sale tax on
the consumer. What will the new market price...

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...

Suppose that the demand curve for wheat is D(p) = 120 − 10p
and the supply curve is S(p) = 2p.
Compute the consumer and producer surplus at the equilibrium.
Indicate them on a clearly marked graph.
Assume that the government imposes a specific tax of $2.4 on
wheat, to be paid by the consumers. Compute the government revenue
and the deadweight loss generated by this tax.

Suppose the market demand for a commodity is given by the
download sloping linear demand function:
P(Q) = 3000 - 6Q
where P is a price and Q is quantity. Furthermore, suppose the
market supply curve is given by the equation:
P(Q) = 4Q
a) Calculate the equilibrium price, quantity, consumer surplus
and producer surplus.
b) Given the equilibrium price calculated above (say's P*),
suppose the government imposes a price floor given by P' > P*.
Pick any such P'...

Consider the market for butter in
Saudi Arabia. The demand and supply relations are given as
follows:
Demand:
QD = 12 - 2P
Supply:
Qs = 3P - 3.
P is the price of butter.
Calculate:
Equilibrium price _____________
2. Equilibrium quantity _____________
Consumer surplus
___________
4. Producer surplus ___________
Draw the demand and supply graphs. Show the equilibrium price
and quantity, consumer surplus and producer surplus in the graph
below. Graphs must be on scale.
Suppose government imposes...

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