Given the supply and demand fucntion Supply- Q= 200p-500 Demand- 5000-300p Suppose that the president is concerned that they are producing Deadweight Loss in this case and are not even raising any revenue. The president proposes instituting a tax that will still result in a Q of 600 units, but, as the presdient says, it would also increase Total Surplus because of the revenue it raises. If the Presdient wants to reduce the quantity sold in this market to be equal to 600 units, then what size tax does the presedient need to put into place?
Given the supply and demand fucntion
Supply- Q= 200p-500
Demand- 5000-300p
Suppose that the president is concerned that they are producing
and are not even raising any revenue. The president proposes instituting a tax that will still result in a Q of 600 units, but, as the presdient says, it would also increase
Total Surplus because of the revenue it raises.
If the Presdient wants to reduce the quantity sold in this market to be equal to 600 units, then
what size tax does the presedient need to put into place?
In the free market, equiibrium price is determined by the forces of demand and supply. The demand curve is downward sloping indicating negative relationship between quantity demanded and price. The supply curve is upward sloping indicating positive relationship between price and quantity supplied.
Government can interfere in the market by imposing taxes, providing subsidies or regulating price and quantity.
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