Please answer this specificly so o can understand how to do it. Thank you! The demand and supply curves are given by q = 80 - 4 p andq = 6 p-40, respectively; the equilibrium price is $12 and the-equilibrium quantity is 32 units. A sales tax of 7% is imposedon the consumer.(a) Find the equation of the new demand and supply curves.NOTE: Enter the exact answer.Demand: q =Supply: q =(b) Find the new equilibrium price and quantity.NOTE: Round your answers to two decimal places.P = $q=units.(c) How much is paid in taxes on each unit? How much of this is paidby the consumer and how much by the producer?NOTE: Round your answers to two decimal places.Tax paid by consumer == $Tax paid by producer = $Total tax paid = $(d) How much tax does the government collect?NOTE: Round your answers to two decimal places.Total tax collected = $

Answered: The demand and supply curves are given…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please answer this specificly so o can understand how to do it. Thank you!

The demand and supply curves are given by q = 80 - 4 p and
q = 6 p-40, respectively; the equilibrium price is $12 and the
-
equilibrium quantity is 32 units. A sales tax of 7% is imposed
on the consumer.
(a) Find the equation of the new demand and supply curves.
NOTE: Enter the exact answer.
Demand: q =
Supply: q =
(b) Find the new equilibrium price and quantity.
NOTE: Round your answers to two decimal places.
P = $
q=
units.
(c) How much is paid in taxes on each unit? How much of this is paid
by the consumer and how much by the producer?
NOTE: Round your answers to two decimal places.
Tax paid by consumer =
= $
Tax paid by producer = $
Total tax paid = $
(d) How much tax does the government collect?
NOTE: Round your answers to two decimal places.
Total tax collected = $

Expert Solution

Step 1: Defining ad valorem taxes, equilibrium price and quantity

Taxes distort the quantity and price away from equilibrium. With the imposition of taxes, a deadweight loss always occur.

An ad valorem tax is a percentage tax imposed on the market. A tax of $τ %$ will alter the demand and supply curves in the market. The amount of tax is shared by buyers and sellers. The side of the market that is less elastic pays a higher amount of tax.

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