1. Suppose that a market is described by the following supply and demand equatio
ID: 1096013 • Letter: 1
Question
1. Suppose that a market is described by the following supply and demand equations: Qs = 3P Qd =400?P(a) Solve for the equilibrium price and the equilibrium quantity.
(b) Suppose that a tax of $80 is placed on buyers. Solve for the new equilibrium. What happens to the price received by sellers, the price paid by buyers, and the quantity sold?
(c) Calculate the tax revenue and deadweight loss (Provide numerical value of the deadweight loss and show the area on a graph).
1. Suppose that a market is described by the following supply and demand equations: Qs = 3P Qd =400?P
(a) Solve for the equilibrium price and the equilibrium quantity.
(b) Suppose that a tax of $80 is placed on buyers. Solve for the new equilibrium. What happens to the price received by sellers, the price paid by buyers, and the quantity sold?
(c) Calculate the tax revenue and deadweight loss (Provide numerical value of the deadweight loss and show the area on a graph).
1. Suppose that a market is described by the following supply and demand equations: Qs = 3P Qd =400?P
(a) Solve for the equilibrium price and the equilibrium quantity.
(b) Suppose that a tax of $80 is placed on buyers. Solve for the new equilibrium. What happens to the price received by sellers, the price paid by buyers, and the quantity sold?
(c) Calculate the tax revenue and deadweight loss (Provide numerical value of the deadweight loss and show the area on a graph).
Explanation / Answer
At Equillibrium=Qs=Qp or 3P=400-P or,4P=400 , or P=100 Q=3P=3*100=300 P*Q=300*100=30000 If Tax 80 applied, total buying power=30000-80=29920 Q=29920/100=299.2( P remains at 100)
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