Question

2. Demand and supply in a market are expressed as follows: 2P + QD = 20 P - QS = 1. Suppose now that the government decides to introduce a tax per unit sold in the amount t = $3.

a) Determine the new equilibrium quantity in the market, the prices paid by consumers and received by sellers, as well as the government's revenues.

b) Represent the changes occurring in equilibrium on a graph. Identify on that graph the deadweight loss generated by the tax. Explain your answer.

c) Determine the elasticities of demand and supply between the initial equilibrium point and the new equilibrium for consumers and producers, according to the price each of them pays or receives. What do these values tell you about who shares most of the burden of the tax? Is that conclusion consistent with the results you obtained in part a? Explain.

Answer #1

Assume that the demand function for a particular good is
Qd=90-2P and the supply function is Qs= -10+2P. Assume that the
market for the particular good was initially the equilibrium (with
no taxes, no regulation, etc.). Assume that a tax of $1 is imposed
on the sellers of the good. How will the incidence of the tax be
distributed between the sellers (producers) and the buyers
(consumers) of the good?

2. The following are the market Demand and Supply functions for
salmon steak.
QD = 8000-1000 P
QS = 2000P – 4000
Suppose the local government imposes a sales tax of $0.75 per
pound. Find:
a. The original equilibrium price and quantity.
b. The after-tax price and quantity.
c. The absolute and percentage shares for consumers and producers
of the tax burden.
d. Show on a graph the tax burden and its division...

The demand and supply for a good are respectively QD = 16 – 2P +
2I and QS = 2P – 4 with QD denoting the quantity demanded, QS the
quantity supplied, and P the price for the good. Suppose the
consumers’ income is I = 2. 6) Determine the price-elasticity of
demand if P = 2. 7) Determine the income-elasticity of demand if P
= 2. 8) Determine the price-elasticity of supply if P = 4. 9)
Determine consumers’...

Suppose the market for grass seed can be expressed as: Demand:
QD = 200 - 5p
Supply: QS = 40 + 5p
3.1 Calculate the price and quantity in equilibrium
3.2 If the government collects a $5 specific tax from sellers,
how much will the quantity
demanded change from the amount demanded before the tax? What
price will consumers pay after the tax? What price will sellers
receive after the tax? What is the tax revenue?
3.3 Draw the graph...

Consider the following market. Demand is given by qd = 150 – 2P,
where qd is the quantity demanded and P is the price. Supply is
given by qs = P, where qs is the quantity supplied.The government
implements a tax of $30 per unit to be paid by consumers. What is
the new market equilibrium? What is the economic incidence of the
tax (that is, who pays for the tax)? How would your answer change
if the government implemented...

Suppose the demand curve for a good is given by QD = 10 - 2P and
the supply curve is given by QS = -2 + P.
a) (4 points) Find the equilibrium price and quantity in the
absence of any government intervention.
b) (6 points) Now suppose the government imposes a tax of t = 3.
Find the new equilibrium price at
which the good is sold in the market and the quantity of the
good sold. What is...

Suppose that a market is described by the following supply and
demand equations:
QS = 2P
QD = 400 - 3P
Solve for the equilibrium price and the equilibrium
quantity.
Suppose that a tax of T is placed on buyers, so the new demand
equation is
QD = 400 – 3(P+T)
Solve for the new equilibrium. What happens to the price
received by sellers, the price paid by buyers, and the quantity
sold?
Tax revenue is T x Q. Use...

Question 2. The market supply and demand curves for a product
are:
QS=0.5P (supply curve)
QD=60–2P (demand curve)
where Q is the quantity of the product and P is the market
price.
(1). Calculate the equilibrium price, equilibrium quantity and
total social welfare. (10 points)
(2). Suppose that the market has changed from a perfectly
competitive market to a monopoly market, calculate the new
price–output combination and the total deadweight loss in the
monopoly market. (10 points)

1. The market demand and supply was given as follow: Qd = 10 –
2P Qs = -5 + 3P
a) Compute for the Price equilibrium
b) Compute for the Quantity equilibrium
c) Plot/graph the following equation.
2. Given the equation, find the equilibrium price and quantity
of the following market and plot the equation. 13P – Qs = 27 Qd +
4P – 24 = 0

Suppose that a market is described by the following supply and
demand equations:
QS = 2P
QD = 400 - 3P
Suppose that a tax of T is placed on buyers, so the new demand
equation is
QD = 400 – 3(P+T)
Solve for the new equilibrium. What happens to the price
received by sellers, the price paid by buyers, and the quantity
sold?
Tax revenue is T x Q. Use your answer from part (b) to solve for
tax...

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