The demand curve for salted codfish (saltfish) is D(p) = 200 5p and the supply c

Question

The demand curve for salted codfish (saltfish) is D(p) = 200 5p and the supply curve is S(p) = 5p. 1

(a) On a graph with saltfish on the horizontal axis and the price of saltfish on the virtical, draw the demand and supply curves. What is the equilibrium price? What is the equilibrium quantity sold?

(b) A quantity tax t = 2 per unit sold is placed on saltfish. On the same graph draw the new supply curve. (The price on the vertical axis remains the price paid by the demanders.) What is the new equilibrium price paid by the demanders? What is the new price received by the suppliers? What is the equilibrium quantity sold?

(c) On your graph, shade in the area that represents the deadweight loss. Calculate the deadweight loss.

Explanation / Answer

a)

200-5p = 5p.1

200 = 5p.1 + 5p

10p = 200

p=20

The equilibrium price of the salt fish is 20

Substituting 20 in place of p:

S=5(20).1 = 100.

and the equilibrium quantity sold is 100.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.