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In a competitive market the equilibrium price, P, and quantity, Q, are found by setting QS = QD = Q in the supply and demand equations:  P=aQS +b(a>0,b>0) P=−cQD +d(c>0,d>0) A) If the government levies an excise tax, t, per unit, show that: Q=d-b-t/a+c B)Deduce that the government’s tax revenue, T = tQ, is maximised by taking t=d-b/2

In a competitive market the equilibrium price, P, and quantity, Q, are found by setting QS = QD = Q in the supply and demand equations:  P=aQS +b(a>0,b>0) P=−cQD +d(c>0,d>0) A) If the government levies an excise tax, t, per unit, show that: Q=d-b-t/a+c B)Deduce that the government’s tax revenue, T = tQ, is maximised by taking t=d-b/2

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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In a competitive market the equilibrium price, P, and quantity, Q, are found by setting QS = QD = Q in the supply and demand equations: 


P=aQS +b(a>0,b>0)

P=−cQD +d(c>0,d>0)


A) If the government levies an excise tax, t, per unit, show that:

Q=d-b-t/a+c

B)Deduce that the government’s tax revenue, T = tQ, is maximised by taking
t=d-b/2

9. In a competitive market the equilibrium price, P, and quantity, Q, are found by setting Os = Qp = Q in the supply and demand equations P = aQs + b (a>0, b > 0) P = -cQp + d (c > 0, d > 0) If the government levies an excise tax, t, per unit, show that d – b – t a + c Deduce that the government's tax revenue, T = tQ, is maximised by taking d - b t =
Transcribed Image Text:9. In a competitive market the equilibrium price, P, and quantity, Q, are found by setting Os = Qp = Q in the supply and demand equations P = aQs + b (a>0, b > 0) P = -cQp + d (c > 0, d > 0) If the government levies an excise tax, t, per unit, show that d – b – t a + c Deduce that the government's tax revenue, T = tQ, is maximised by taking d - b t =
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