2. Suppose the demand for a commodity depends on the price per unit P according toD = a – bP, but that a tax of t per unit is imposed on the consumers. The constants aand b are positive. The supply function is S = g(P), where g'(P) > 0.a. Express the equilibrium condition in the marker for this commodity.b. The equilibrium equation defines P as a differentiable function of t. Find dP/dt anddetermine its sign.c. What happens to the price P +t paid by the consumers when t increases?

Answered: Image /qna-images/answer/cc79053d-d08d-405c-be04-cdd0dd8ce869.jpg

2. Suppose the demand for a commodity depends on the price per unit P according to D = a – bP, but that a tax of t per unit is imposed on the consumers. The constants a and b are positive. The supply function is S = g(P), where g'(P) > 0. %3D a. Express the equilibrium condition in the marker for this commodity. b. The equilibrium equation defines P as a differentiable function of t. Find dP/dt and determine its sign. c. What happens to the price P + t paid by the consumers when t increases?

2. Suppose the demand for a commodity depends on the price per unit P according to D = a – bP, but that a tax of t per unit is imposed on the consumers. The constants a and b are positive. The supply function is S = g(P), where g'(P) > 0. %3D a. Express the equilibrium condition in the marker for this commodity. b. The equilibrium equation defines P as a differentiable function of t. Find dP/dt and determine its sign. c. What happens to the price P + t paid by the consumers when t increases?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter5: Income And Substitution Effects

Section: Chapter Questions

Problem 5.1P

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