Question

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

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?

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