Let the demand and supply functions for a commodity be Qu = D(P, Yo) Qs = S(P, To) where Yo is income and To is the tax on the commodity. All derivatives are continuous. (a) Write the equilibrium condition in a single equation. (b) Check whether the implicit-function theorem is applicable. If so, write the equilib- rium identity. (c) Find (a P*/aY,) and (aP*/aTo), and discuss their economic implications. (D, < 0; DY > 0) (Sp > 0: ST, < 0)

Let the demand and supply functions for a commodity be Qu = D(P, Yo) Qs = S(P, To) where Yo is income and To is the tax on the commodity. All derivatives are continuous. (a) Write the equilibrium condition in a single equation. (b) Check whether the implicit-function theorem is applicable. If so, write the equilib- rium identity. (c) Find (a P/aY,) and (aP/aTo), and discuss their economic implications. (D, < 0; DY > 0) (Sp > 0: ST, < 0)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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