Consider a demand and supply model wherehouseholds pay a tax T for every unit they buy.Demand and supply are therefore given byQ^d=D(P+T) and Q^s=S(P). Calculate (aQ^*)/ƏTand (aP^*)/ƏT and show that both are negative(Q^* and PA* are equilibrium quantity demandedand equilibrium price respectively.)

The equilibrium price is the only price where the desires of consumers and the desires of producers…

ouseholds pay a tax T for every unit they buy. emand and supply are therefore given by ^d=D(P+T) and Q^s=S(P). Calculate (ƏQ^*)/ƏT nd (aP^*)/ƏT and show that both are negative Q^* and P^* are equilibrium quantity demanded

ouseholds pay a tax T for every unit they buy. emand and supply are therefore given by ^d=D(P+T) and Q^s=S(P). Calculate (ƏQ^)/ƏT nd (aP^)/ƏT and show that both are negative Q^* and P^* are equilibrium quantity demanded

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

Consider a demand and supply model where
households pay a tax T for every unit they buy.
Demand and supply are therefore given by
Q^d=D(P+T) and Q^s=S(P). Calculate (aQ^*)/ƏT
and (aP^*)/ƏT and show that both are negative
(Q^* and PA* are equilibrium quantity demanded
and equilibrium price respectively.)

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