Explanation The demand and supply functions are: Q x d = 14 − 0 .5P x and Q x s = 0.25 P x − 1 In a market, the equilibrium is achieved where quantity demand is equal to quantity supplied. At equilibrium, Q x d = Q x s Now, substituting the function in above equilibrium condition and solve for equilibrium price and quantity as follows: 14 − 0 .5P x = 0.25 P x − 1 0 To determine (b) To find: The new equilibrium price and quantity when excise tax of $12 is imposed. To determine (c) To find: The tax revenue that the government will earn at imposing $12 as tax.

(a) To find: The equilibrium quantity and price and its graphical representation.

MANAGERIAL ECON.+BUS.STRATEGY (LOOSE)

9th Edition

ISBN: 9781259896422

Author: Baye

Publisher: MCG

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