2. Consider the market for Widgets. Suppose that the equation for the supply curve is: Qs = 1,000P – 10,000, and the equation for the demand curve is: Qd = 50,000 – 2,000P. a. Calculate the equilibrium price and quantity. b. Suppose the government requires consumers to pay a tax of $3 per Widget purchased. Find the new inverse demand curve under the tax as well as the inverse supply curve. (Hint: Shift the inverse demand curve down by the amount of the tax.) c. Compute the quantity produced under the tax, the tax revenue raised, the price received by the suppliers, and the price paid by the consumers. d. Compute the change in CS and PS. Which side of the market suffered the larger actual burden?

2. Consider the market for Widgets. Suppose that the equation for the supply curve is: Qs = 1,000P – 10,000, and the equation for the demand curve is: Qd = 50,000 – 2,000P. a. Calculate the equilibrium price and quantity. b. Suppose the government requires consumers to pay a tax of $3 per Widget purchased. Find the new inverse demand curve under the tax as well as the inverse supply curve. (Hint: Shift the inverse demand curve down by the amount of the tax.) c. Compute the quantity produced under the tax, the tax revenue raised, the price received by the suppliers, and the price paid by the consumers. d. Compute the change in CS and PS. Which side of the market suffered the larger actual burden?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hi I need the Answer to this Question please thank you

2. Consider the market for Widgets.
Suppose that the equation for the supply curve is: Qs = 1,000P – 10,000,
and the equation for the demand curve is: Qd = 50,000 – 2,000P.
a. Calculate the equilibrium price and quantity.
b. Suppose the government requires consumers to pay a tax of $3 per Widget purchased. Find
the new inverse demand curve under the tax as well as the inverse supply curve.
(Hint: Shift the inverse demand curve down by the amount of the tax.)
c. Compute the quantity produced under the tax, the tax revenue raised, the price received by the
suppliers, and the price paid by the consumers.
d. Compute the change in CS and PS. Which side of the market suffered the larger actual
burden?

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