1. The market demand curve is D(p) = 8p. The market supply curve is S(p)=2+2p. (a) What is the equilibrium price and equilibrium quantity? (b) Suppose the government taxes sellers one dollar for each unit of sales. What are the equilibrium price, equilibrium quantity, consumer surplus, seller surplus, collected tax, and deadweight loss compared to (a)? (c) Suppose the government subsidizes consumers one dollar for each unit of purchase. What are the equilibrium price, equilibrium quantity, con- sumer surplus, seller surplus, collected tax, and deadweight loss compared to (a)?

Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter5: Elasticity Of Demand And Supply
Section5.A: Appendix: Price Elasticity And Tax Incidence
Problem 1AQ
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1. The market demand curve is D(p) = 8p. The market supply curve is
S(p)=2+2p.
(a)
What is the equilibrium price and equilibrium quantity?
(b)
Suppose the government taxes sellers one dollar for each unit
of sales. What are the equilibrium price, equilibrium quantity, consumer
surplus, seller surplus, collected tax, and deadweight loss compared to (a)?
(c)
Suppose the government subsidizes consumers one dollar for each
unit of purchase. What are the equilibrium price, equilibrium quantity, con-
sumer surplus, seller surplus, collected tax, and deadweight loss compared to
(a)?
Transcribed Image Text:1. The market demand curve is D(p) = 8p. The market supply curve is S(p)=2+2p. (a) What is the equilibrium price and equilibrium quantity? (b) Suppose the government taxes sellers one dollar for each unit of sales. What are the equilibrium price, equilibrium quantity, consumer surplus, seller surplus, collected tax, and deadweight loss compared to (a)? (c) Suppose the government subsidizes consumers one dollar for each unit of purchase. What are the equilibrium price, equilibrium quantity, con- sumer surplus, seller surplus, collected tax, and deadweight loss compared to (a)?
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