The demand and supply equations for a product are:Qd = 300 - 6P and Qs = -40 + 6P.Determine the market equilibrium and draw graphs.Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumer pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain.Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.

Market equilibrium is achieved at the point where the demand and supply curve intersects, i.e the…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The demand and supply equations for a product are:

Q^d = 300 - 6P and Q^s= -40 + 6P.

Determine the market equilibrium and draw graphs.
Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumer pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain.
Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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