Demand: P=30-2Q Supply: P=4Q Answer Equilibrium Price____ Equilibrium Quantity__

Question

Demand: P=30-2Q

Supply:    P=4Q

Answer

Equilibrium Price____

Equilibrium Quantity______

Own Price Elasticity of demand Equlilbrium______

Consumer surplus________

Producer surplus__________

Same market after $6 sales Tax

What is the new price that consumer see?________

What is the price that suppliers receive?__________

What is the new quantity sold/produced__________

Consumer surplus_________

Producer surplus_______

Government revenue____________

Dead weight loss after tax is imposed__________

SHOW WORK PLEASE!!! and create graph if possible!

Explanation / Answer

Demand: P=30-2Q

Supply: P=4Q

4Q = 30-2Q

Q = 5

Equilibrium Price = P = 20

Equilibrium Quantity = Q = 5

Own Price Elasticity of demand Equlilbrium = dQ/dP*P/Q = 0.5*20/5 = 2

Consumer surplus = (30-20)*5/2 = 25

Producer surplus = (20-0)*5/2 = 50

elasticity of supply = dQ/dP*P/Q = 1/4*20/5 = 1

elasticity of demand = 2

new price that consumer see = 20+1/3*6 = 22

new price that suppliers receive = 20-2/3*6 = 16

new quantity sold/produced = 16/4 = 4

Consumer surplus = (30-22)*4/2 = 16

Producer surplus = (16-0)*4/2 = 32

Dead weight loss after tax is imposed = (50+25) - (16+32) = 27

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