6. Equilibrium prices and quantities are determined by demand D₁ = 200-2p1 and supply S₁ = 2p1-40 in the market for Good 1 and by D₂ = 240-2p2 and supply S₂ = 2p2-P1-20 in the market for Good 2. a. Provide a diagram showing the equilibrium price and quantity in the market for Good 1 and a second diagram showing the equilibrium price and quantity in the market for Good 2. b. Next month the government will introduce a t = 40 per unit tax in the market for Good 1 (not Good 2). Update your diagrams to show and quantify how prices and quantities will be affected in both markets. C. Illustrate (do not calculate) why the price of Good 2 would increase by more if the demand curve in Market 1 was more elastic.
6. Equilibrium prices and quantities are determined by demand D₁ = 200-2p1 and supply S₁ = 2p1-40 in the market for Good 1 and by D₂ = 240-2p2 and supply S₂ = 2p2-P1-20 in the market for Good 2. a. Provide a diagram showing the equilibrium price and quantity in the market for Good 1 and a second diagram showing the equilibrium price and quantity in the market for Good 2. b. Next month the government will introduce a t = 40 per unit tax in the market for Good 1 (not Good 2). Update your diagrams to show and quantify how prices and quantities will be affected in both markets. C. Illustrate (do not calculate) why the price of Good 2 would increase by more if the demand curve in Market 1 was more elastic.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:6. Equilibrium prices and quantities are determined by demand D₁ = 200-2p1 and supply S₁ = 2p1-40 in the
market for Good 1 and by D₂ = 240-2p2 and supply S₂ = 2p2-P1-20 in the market for Good 2.
a.
Provide a diagram showing the equilibrium price and quantity in the market for Good 1 and a second
diagram showing the equilibrium price and quantity in the market for Good 2.
b.
Next month the government will introduce a t = 40 per unit tax in the market for Good 1 (not Good 2).
Update your diagrams to show and quantify how prices and quantities will be affected in both markets.
C.
Illustrate (do not calculate) why the price of Good 2 would increase by more if the demand curve in
Market 1 was more elastic.
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