Suppose that a market is described by the following supply and demand equations:Qs=2PQD=300-Pa.Solve for the equilibrium price and the equilibrium quantity.b.Solve that a tax of T is placed on buyers,so the new denad equation is QD=300-(P+T).Solve for the new equilibrium.What happens to the price receive by sellers,the price paid by buyers.and the quantity sold?c.Tax revenue is TxQ.Use your answer from part(b)to solve for tax revenue as a function of T.Graph this relationship for T between 0 and 300.d.The dead weight loss of a tax is the area of a triangle between supply and demand curves.Recalling that the area of the triangle is 1/2xbasexheight,solve for the dead weight loss as afunction of T.Graph this relationship for T between 0 and 300.e.The government now levies a tax of $200per unit on this good.Is this a good policy?Why or why not?Can you propose a better policy?
Suppose that a market is described by the following
Qs=2P
QD=300-P
a.Solve for the
b.Solve that a tax of T is placed on buyers,so the new denad equation is QD=300-(P+T).Solve for the new equilibrium.What happens to the price receive by sellers,the price paid by buyers.and the quantity sold?
c.Tax revenue is TxQ.Use your answer from part(b)to solve for tax revenue as a function of T.Graph this relationship for T between 0 and 300.
d.The dead weight loss of a tax is the area of a triangle between supply and demand curves.Recalling that the area of the triangle is 1/2xbasexheight,solve for the dead weight loss as afunction of T.Graph this relationship for T between 0 and 300.
e.The government now levies a tax of $200per unit on this good.Is this a good policy?Why or why not?Can you propose a better policy?
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