### Market Supply and Demand AnalysisThe diagram provided illustrates the market supply and demand for a product. Here’s a detailed explanation of the graph and the questions associated with it:#### Graph Description- **Axes**: The vertical axis represents price, while the horizontal axis represents quantity.- **Supply Curve**: Upward sloping, indicating that as price increases, supply increases.- **Demand Curve**: Downward sloping, indicating that as price decreases, demand increases.- **Equilibrium**: The intersection of supply and demand curves occurs at a price of $6 with a quantity of 80 units.- **Prices**: The supply curve starts at $10, aligning with a quantity of zero, and intersects the demand line at $6.#### Questions(a) **Is the price elasticity of supply less than one, equal to one, or greater than one? Explain.**(b) **Calculate consumer surplus at the equilibrium price. Show your work.**(c) **Now suppose the government imposes a per-unit tax of $1 on producers.** - (i) What happens to total revenue received by producers after they pay the tax to the government? Explain. - (ii) Will producer surplus increase, decrease, or stay the same? Explain. - (iii) Will total surplus increase, decrease, or stay the same? Explain.### Analysis Overview**Elasticity of Supply**: To determine whether it is less than, equal to, or greater than one, consider the responsiveness of quantity supplied to price changes. Further detail would require calculation based on specific data or a functional form of the supply curve.**Consumer Surplus Calculation**:Consumer surplus is the area above the price level ($6) and below the demand curve, up to the quantity of 80. Calculate it using the area of a triangle formula: \[Consumer \ Surplus = \frac{1}{2} \times (Base \times Height)\]Where the base is the quantity (80 units) and the height is the difference between the maximum price consumers are willing to pay ($10) and the equilibrium price ($6).**Impact of Tax**:When a $1 tax is introduced:- **Total Revenue for Producers**: Below the equilibrium price due to reduced quantity sold or increased costs.- **Producer Surplus**: Likely decreases as their net revenue diminishes.- **Total Surplus**: Decreases

Answer: (a). According to the above figure, the supply curve is a horizontal line (perfectly…

3. The market supply and demand for a product are shown in the diagram below. $10 $6 Supply Demand 80 200 QUANTITY (a) Is the price elasticity of supply less than one, equal to one, or greater than one? Explain. (b) Calculate consumer surplus at the equilibrium price. Show your work. (c) Now suppose the government imposes a per-unit tax of $1 on producers. (i) What happens to total revenue received by producers after they pay the tax to the goven Explain. (ii) Will producer surplus increase, decrease, or stay the same? (iii) Will total surplus increase, decrease, or stay the same? Explain. PRICE

3. The market supply and demand for a product are shown in the diagram below. $10 $6 Supply Demand 80 200 QUANTITY (a) Is the price elasticity of supply less than one, equal to one, or greater than one? Explain. (b) Calculate consumer surplus at the equilibrium price. Show your work. (c) Now suppose the government imposes a per-unit tax of $1 on producers. (i) What happens to total revenue received by producers after they pay the tax to the goven Explain. (ii) Will producer surplus increase, decrease, or stay the same? (iii) Will total surplus increase, decrease, or stay the same? Explain. PRICE

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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