numbers. When filling in the blanks, enter the NUMBERS only. Do NOT enter commas
ID: 1123304 • Letter: N
Question
numbers. When filling in the blanks, enter the NUMBERS only. Do NOT enter commas, dollar signs, percent signs, or text. If your answer is a decimal, include your decimal point and round to the nearest tenth. Consider the fictitious good Derp. The demand for Derp is Q = 1200 – 2P. Suppose the supply of Derp is given by Q = –600 +2P. What is the equilibrium price of Derp? What is the equilibrium quantity of Derp? What is the price elasticity of demand at the equilibrium price and quantity? What is the price elasticity of supply at the equilibrium price and quantity? For the next seven questions, suppose a per-unit excise tax of $50 per Derp is levied on the consumers. What price will sellers receive after the tax is levied? What price will consumers pay after the tax is levied? What percent of the tax will be paid by the consumers of Derp? (give an answer between 0 and 100) What percent of the tax will be paid by the suppliers of Derp? (give an answer between 0 and 100) How many Derps will be sold after the tax is imposed? How much consumer surplus do consumers get after the tax? What is the deadweight loss created by this tax?
Explanation / Answer
Answer:-
Demand for Derp is Q = 1200 – 2P
Supply of Derp is given by Q = –600 +2P.
For equilibrium, Supply = Demand
-600+2P=1200-2P
4P=1800
P=450
SO CORRECT ANSWER IS:- P=450
EQUILIBRIUM QUANTITY Q=1200-2*450 = 1200-900 =300
Answer:- elasticity of demand is given by (dQ / dP)*(P/Q),
dQ / dP=-2
thus elasticity of demand =-2(450/300) = 3
Answer:- elasticity of supply is given by (dQ / dP)*(P/Q),
dP / dQ=2
thus elasticity of demand =-2(450/300) = 3
Answer:- price will sellers receive after the tax is levied = $450-$50/2 =$425
Answer:- consumers pay after the tax is levied=$50
Answer:- Number of Derps will be sold after the tax is imposed =250
Answer:- consumer surplus consumers get after the tax =$15625
Answer:- deadweight loss created by this tax=1250
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