Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 19, Problem 2.5P
(a)
To determine
Identify the
(b)
To determine
Identify the new equilibrium price and new equilibrium quantity and calculate the value of per unit tax.
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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 consumers 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 deadweight loss
The demand and supply equations for a product are: Q^d=300-6p and Q^x=-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 consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graph 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
The following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax
equilibrium. Suppose the government has Just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario.
Demand
Supply
16, 18
21.00
18.00
15.00
QUANTITY (Pinckneys)
Complete the following table, given the information presented on the graph.
Result
Value
Per-unit tax
$6.00
Equilbrium quantity before tax
Price producers recelve before tax
$18.00
In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply.
Concept
D.
Deadweight loss after the tax is imposed
Consumer surplus after the tax is imposed
Producer surplus before the tax Is imposed
PRICE (Dotars per pinckney)
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Chapter 19 Solutions
Principles of Economics (12th Edition)
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Similar questions
- At the current market equilibrium, the price elasticity of demand for a certain good is much higher than the price elasticity of supply. If the government imposes a $2 specific tax on this good, who will bear more of the burden of the tax? Illustrate.arrow_forwardSuppose that the demand and supply functions for a good are given as follows: Demand: Q = 720 –8P Supply: Q = -160 + 3P What is the price elasticity of demand at the equilibrium when there is no tax? 8 4. 0.5 1.25arrow_forwardthe government has imposed an indirect tax on good A and the coefficient of the price elasticity of demand is <1. Explain and demonstrate with the use of appropriate diagrams the effect of this tax on both the buyer and seller. indicate in your diagram by shading the regions in different colours the price paid by consumer and price paid by supplier.arrow_forward
- Suppose demand is D and supply is S0 so that equilibrium price is $10. If an excise tax of $6 is imposed on this product, what happens to the equilibrium price paid by consumers? The price received by producers? The number of units sold?Equilibrium price paid by consumers: $ Price received by producers: $ Number of units sold:arrow_forwardIf a tax of $1.20 is imposed on consumers in this market, what is the tax revenue?arrow_forwardSuppose that the demand for tea in Boston is described by Quantity demanded = 20-p and the quantity supplied = 2p-4. What would be the price paid by consumers if there was a 6 dollar tax on tea?arrow_forward
- Consider the following demand and supply functions:Qd = 80 − 2PQs = −100 + 8P (i) Find the equilibrium price and quantity(ii) Suppose govt. imposes a sales tax of TK.4 per unit, calculate the new equilibrium price and quantity.(iii) Suppose govt. provides subsidy of TK.3 per unit, calculate the new equilibrium price and quantity.arrow_forwardSuppose that the price elasticity of beer demand is 0.8 (Eg = 0.8) and the price elasticity of beer supply is 1.7 (E, 1.7). If the government imposes a $2 per six-pack excise tax on the production of beer, then the price that consumers pay will _ and at the after-tax quantity, Qtax O increase by more $2; a deadweight loss results because MB(Qta) > MC(Qtax). O decrease by less than $1; a deadweight loss results because MB(Qtax) MC(Qta). O increase by less than $1; a deadweight loss results because MB(Qa) > MC(Qtax).arrow_forwardSuppose demand and supply are given by? = 500-2P and ? =-100+3Pa) Which function is the demand function and why?b) Compute the equilibrium price and quantity in this market?c) Compute the consumer surplus and producer surplus.d) Suppose a GHC 1 exercise tax is imposed on the good. Determine the new equilibrium price and quantity.e) Compute the tax revenue to the government. f) Compute the deadweight loss resulting from the tax.arrow_forward
- The following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. PRICE (Dollars per pinckney) 37.50- 30.00 22.50 Demand Result Per-unit A B D с E 2.5 Supply QUANTITY (Pinckneys) Complete the following table, given the information presented on the graph. Equilibrium quantity after tax Price producers receive before tax $ Value ?arrow_forwardPlease answer both questions 2e - parts 2 and 3arrow_forwardSuppose that the demand and supply functions for a good are given as follows: Demand: 0-720-8P Supply: Q =-160 + 3P What is the price elasticity of demand at the equilibrium when there is no tax? 0.5 1.25arrow_forward
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