1. Consider a market described by the following equations: Qd = a + BP Qs = φ + MP Where a, b, p and μ are parameters. Note that must be less than zero and the other parameters are positive. Answer the following questions. Solve for the equilibrium price and quantity. a. b. C. Now suppose a specific tax, t > 0, is imposed on this market that has to be paid to the government by sellers. Show in a clearly labeled supply and demand diagram what happens to the equilibrium effectively price received by sellers, and the price paid by buyers. Be sure to label the price received by sellers and the price paid by buyers in terms of P*(T) and T. Set up the equilibrium condition. Then solve for the price paid by buyers, the price received by sellers, and the after tax equilibrium quantity in terms of the parameters of the model and the tax amount T.

1. Consider a market described by the following equations: Qd = a + BP Qs = φ + MP Where a, b, p and μ are parameters. Note that must be less than zero and the other parameters are positive. Answer the following questions. Solve for the equilibrium price and quantity. a. b. C. Now suppose a specific tax, t > 0, is imposed on this market that has to be paid to the government by sellers. Show in a clearly labeled supply and demand diagram what happens to the equilibrium effectively price received by sellers, and the price paid by buyers. Be sure to label the price received by sellers and the price paid by buyers in terms of P*(T) and T. Set up the equilibrium condition. Then solve for the price paid by buyers, the price received by sellers, and the after tax equilibrium quantity in terms of the parameters of the model and the tax amount T.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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