A market is described by the following supply and demand curves: Supply: P=0.25Q Demand: P=300-0.75Q (a) Solve for the equilibrium price and quantity and calculate the total economic surplus with a diagram. (b) Suppose government sets a price floor of $90. With the price regulation, calculate with a diagram the sizes of shortage (or surplus), consumer surplus, produce surplus and deadweight loss. (c) Instead of a price floor, government regulates the price by a price ceiling of $90. Predict the change of market efficiency if the government imposes a price ceiling of $90. (d) Instead of a price control, government levies a $20 excite tax on producers. Formulate the new supply curve and solve for the new equilibrium price and quantity. Calculate with a diagram the tax revenue and the tax incidences for both producers and consumers. Discuss how buyers and sellers share the tax burden by applying relevant theories and an appropriate diagram.
A market is described by the following
Supply: P=0.25Q
Demand: P=300-0.75Q
(a) Solve for the
with a diagram.
(b) Suppose government sets a
with a diagram the sizes of shortage (or
and
(c) Instead of a price floor, government regulates the price by a
Predict the change of market efficiency if the government imposes a price ceiling of
$90.
(d) Instead of a price control, government levies a $20 excite tax on producers. Formulate
the new supply curve and solve for the new equilibrium price and quantity. Calculate
with a diagram the tax revenue and the tax incidences for both producers and
consumers. Discuss how buyers and sellers share the tax burden by applying relevant
theories and an appropriate diagram.
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