7.7. Sales tax. Consider an industry with market demand. Q = 550-20p and market supply Q = 100+10 p. Determine the equilibrium price and quantity. Suppose the government imposes a tax of $6 per unit to be paid by consumers. What is the impact on equilibrium price and quantity? What if the sales tax is paid by the seller instead of the buyer?

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7.7 pleaase explain

## 7.7. Sales Tax

### Market Equilibrium

Consider an industry with the following market demand and supply equations:

- **Market Demand:** \( Q = 550 - 20p \)
- **Market Supply:** \( Q = 100 + 10p \)

Determine the equilibrium price and quantity.

### Tax Impact Analysis

Suppose the government imposes a tax of $6 per unit to be paid by consumers. Analyze the impact on equilibrium price and quantity. Consider the scenario where the sales tax is instead paid by the seller. How would this affect the equilibrium outcomes?

### Graphs/Diagrams

No graphs or diagrams are included in this text. However, when analyzing the problem, a supply and demand graph can be helpful to visualize the shifts caused by the tax imposition on consumers or sellers. The initial equilibrium can be identified where the demand and supply curves intersect. When a tax is implemented, the demand curve will shift vertically downwards by the amount of the tax if consumers pay it, or the supply curve will shift upwards by the same amount if sellers bear the tax.

### Conclusion

Determining the new equilibrium involves finding the new intersection point of the shifted curve with the original supply or demand curve. The analysis will show how the tax affects market dynamics, including variations in price and quantity.
Transcribed Image Text:## 7.7. Sales Tax ### Market Equilibrium Consider an industry with the following market demand and supply equations: - **Market Demand:** \( Q = 550 - 20p \) - **Market Supply:** \( Q = 100 + 10p \) Determine the equilibrium price and quantity. ### Tax Impact Analysis Suppose the government imposes a tax of $6 per unit to be paid by consumers. Analyze the impact on equilibrium price and quantity. Consider the scenario where the sales tax is instead paid by the seller. How would this affect the equilibrium outcomes? ### Graphs/Diagrams No graphs or diagrams are included in this text. However, when analyzing the problem, a supply and demand graph can be helpful to visualize the shifts caused by the tax imposition on consumers or sellers. The initial equilibrium can be identified where the demand and supply curves intersect. When a tax is implemented, the demand curve will shift vertically downwards by the amount of the tax if consumers pay it, or the supply curve will shift upwards by the same amount if sellers bear the tax. ### Conclusion Determining the new equilibrium involves finding the new intersection point of the shifted curve with the original supply or demand curve. The analysis will show how the tax affects market dynamics, including variations in price and quantity.
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