Consider a competitive market where 16 units are traded at the equilibrium price of 5. a. Given that the elasticity of supply is 0.5 and the elasticity of demand is -0.4, derive linear demand and supply curves for this good. b. This good becomes subject to a federal tax of 1. What does this tax do to the market - clearing price and quantity?

Consider a competitive market where 16 units are traded at the equilibrium price of 5. a. Given that the elasticity of supply is 0.5 and the elasticity of demand is -0.4, derive linear demand and supply curves for this good. b. This good becomes subject to a federal tax of 1. What does this tax do to the market - clearing price and quantity?

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter5: Elasticity Of Demand And Supply

Section5.A: Appendix: Price Elasticity And Tax Incidence

Problem 2AQ

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