**Problem Statement: Gasoline Market Equilibrium and Tax Impact****Demand and Supply Equations:**- **Demand:** $ Q = 980 - 300p $ - Where $ Q $ is the quantity of gasoline in gallons. - $ p $ is the price per gallon in dollars.- **Supply:** $ Q = -2980 + 3000p $**Government Tax Policy:**- A tax of 18 cents is applied to every gallon of gasoline sold.**Questions to Explore:** (a) **Equilibrium Quantities:** - Determine the equilibrium quantities of gasoline before and after the tax is applied.(b) **Consumer and Producer Surplus:** - Analyze the changes in consumer and producer surplus as a result of the tax.(c) **Deadweight Loss:** - Calculate the deadweight loss that occurs due to this tax. This problem explores economic concepts such as market equilibrium, surplus, and deadweight loss in the context of government taxation on goods.

Equilibrium is established where the demand and supply are equal. The change in the demand and…

Daily demand for gasoline at a Gas Station is described by Q = 980 - 300p, where Q are gallons of gasoline sold and p is the price in dollars. Gas Station's supply is Q = -2,980 + 3,000p. Suppose the state government places a tax of 18 cents on every gallon of gasoline sold. (a) What are the before-tax and after-tax equilibrium quantities of gasoline Q? (b) What are the changes in consumer's and producer's surplus due to tax?

Daily demand for gasoline at a Gas Station is described by Q = 980 - 300p, where Q are gallons of gasoline sold and p is the price in dollars. Gas Station's supply is Q = -2,980 + 3,000p. Suppose the state government places a tax of 18 cents on every gallon of gasoline sold. (a) What are the before-tax and after-tax equilibrium quantities of gasoline Q? (b) What are the changes in consumer's and producer's surplus due to tax?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

**Problem Statement: Gasoline Market Equilibrium and Tax Impact**

**Demand and Supply Equations:**
- **Demand:** $ Q = 980 - 300p $
- Where $ Q $ is the quantity of gasoline in gallons.
- $ p $ is the price per gallon in dollars.

- **Supply:** $ Q = -2980 + 3000p $

**Government Tax Policy:**
- A tax of 18 cents is applied to every gallon of gasoline sold.

**Questions to Explore:**

(a) **Equilibrium Quantities:**
- Determine the equilibrium quantities of gasoline before and after the tax is applied.

(b) **Consumer and Producer Surplus:**
- Analyze the changes in consumer and producer surplus as a result of the tax.

(c) **Deadweight Loss:**
- Calculate the deadweight loss that occurs due to this tax.

This problem explores economic concepts such as market equilibrium, surplus, and deadweight loss in the context of government taxation on goods.

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