Question

The market for a particular good is described by the following demand and supply equations

respectively: QD = 448 – 3.5P and QS = 2.5P – 80. Consider that after much discussion among

policymakers and following a final vote, the government implements a 20% ad valorem tax on sellers of

the good. The market adjusts and is currently in equilibrium.

[a.] After the tax is implemented, what quantity of the good is traded? What price do buyers pay and

what price do sellers receive?

[b.] After the tax is implemented, what is the value of the deadweight loss in the market?

[c.] After the tax is implemented, what is the tax revenue from this market?

Answer #1

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...

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...

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?

in
a competitive market, demand is described by qd = wpp - 5p, and
supply is qs = 100 + 5p. suppose a specific or unit tax of $10 per
unit of quantity traded is imposed on the consumers. what is the
equilibrium quantity after the tax is imposed?
qd=
200 -5p

Suppose there is a market at its competitive equilibrium.
Demand p = 100 - QD
Supply p = 20 + (QS /3) The government introduces a subsidy of s
= $4 per unit of the good sold and bought.
(a) Draw the graph for the demand and supply before subsidy.
(b) What is the equilibrium price and quantity before the
subsidy and after the subsidy?
(c) Looking at the prices buyers pay and sellers receive after
the subsidy compared to...

The market of natural gas is described by the following supply
and demand equations:
Qs = 14 + 2 PG + .25 P0 Qd = -5 PG + 3.75 P0
where Qs represent the quantities supplied and demanded of
natural gas (in millions of cubic feet), PG represents the price of
natural gas (per cubic foot) and P0 represents the price of oil
(per barrel).
a) If P0 = 6, find the equilibrium price and quantities
of natural gas.
b)...

Suppose the market for soda is represented by the following
supply and demand equations:
QS = 35P – 39.75 and
QD = 10.25 – 5P, where P is
price per bottle and Q measures bottles per second.
a. What are the value of consumer and producer surplus?
b. If the government imposes a $0.50 tax per bottle, what are
the value of consumer and producer surplus?
c. What is the deadweight loss from the tax? How much revenue
does the...

Suppose the market for grass seed can be expressed as
QD = 100 - 5p and QS = 40 + 5p. Answer the
following:
a.If the government collects a $5 specific tax from the
consumers, what price will consumers pay after the tax? What price
will the sellers receive after the tax? How much the tax
revenue?
b.If the government wants to collect from an ad-valorem tax
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1. Market demand and supply for a commodity are given by the
following equations:
Demand: X = 30 – (1/3) P
Supply: X = -2.5 + (1/2) P where X= quantity (units), and P=price
per unit ($)
Suppose that the government is planning to impose a tax on this
commodity and considering the following two options:
Option 1: A unit tax of $15
Option 2: An ad valorem tax of 20%
a) Find the tax incidence on buyers and producers,...

Questions 16 to 22 The demand and supply for good x are
respectively QD = 28 – Px + Py/2 and QS = Px – 10 with QD denoting
the quantity demanded for good x, QS the quantity supplied for good
x, Px the price for good x, and Py the price for good y a
substitute to good x. Suppose Py = 4. 16) Determine the cross-price
elasticity of demand at the equilibrium. Suppose the government
imposes a unit...

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