The demand and supply functions for three goods are given as follows: Dx=100-3Px+Py+3Pz Dy=80 +Px-2Py-2Pz Dz=120+3Px-Py-4Pz Sx=-10+Px Sy=-20=3Py Sz=-3+2Pz Q1: Determine the equilibrium prices and quantities of all three goods. · The government decides to: a. Impose a 25% tax on X b. Impose a 5Rs unit Tax on Y c. Gives a 10% subsidy on good Z · Analyze the impact of each of these three policies separately on equilibrium prices and Quantities. · Also calculate changes in consumer and producer surpluses and the amount of revenue earned by the government. Q2: Repeat this exercise when polices (a, b),(b,c) & (a, b,c) are jointly implemented. Which policy choice is best? Why? Q:3 Provide theoretical justification (using diagrams) of all results obtained.
The
Dx=100-3Px+Py+3Pz
Dy=80 +Px-2Py-2Pz
Dz=120+3Px-Py-4Pz
Sx=-10+Px
Sy=-20=3Py
Sz=-3+2Pz
Q1: Determine the
· The government decides to:
a. Impose a 25% tax on X
b. Impose a 5Rs unit Tax on Y
c. Gives a 10% subsidy on good Z
· Analyze the impact of each of these three policies separately on equilibrium prices and Quantities.
· Also calculate changes in
Q2: Repeat this exercise when polices (a, b),(b,c) & (a, b,c) are jointly implemented. Which policy choice is best? Why?
Q:3 Provide theoretical justification (using diagrams) of all results obtained.
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