A rice producing company faces the following demand function: Pd = 300 – 0.10Q. The firm’s accountant believes that the supply function of the company is given as: Ps = 100 + 0.10Q where P denotes price of a kilogram of rice GH¢ and Qd and Qs are the quantities demanded and supplied respectively. Based on this information:If the government now decides to impose a per unit tax of GH¢ 15 per unit on the quantity supplied and the company adjusts the supply function appropriately to include tax:Determine the new equilibrium price and quantity in the market for the company.Who pays a larger portion of the tax revenue?What is the total tax revenue to government?Calculate the deadweight loss to society.What type of elasticity of demand exists in the market?What type of elasticity of supply exists in the market after the tax imposition?Present graphically the results of the above questions.Given the type of price elasticity of demand in the market, what should the producer do to raise revenue?

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Answered: A rice producing company faces the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A rice producing company faces the following demand function: Pd = 300 – 0.10Q. The firm’s accountant believes that the supply function of the company is given as: Ps = 100 + 0.10Q where P denotes price of a kilogram of rice GH¢ and Qd and Qs are the quantities demanded and supplied respectively. Based on this information:

If the government now decides to impose a per unit tax of GH¢ 15 per unit on the quantity supplied and the company adjusts the supply function appropriately to include tax:
1. Determine the new equilibrium price and quantity in the market for the company.
2. Who pays a larger portion of the tax revenue?
3. What is the total tax revenue to government?
4. Calculate the deadweight loss to society.
What type of elasticity of demand exists in the market?
What type of elasticity of supply exists in the market after the tax imposition?
Present graphically the results of the above questions.
Given the type of price elasticity of demand in the market, what should the producer do to raise revenue?

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