2.5 The market demand for product X is given by Qd= 6 – 1/2P and the market supply for good X is given by Qs = 2P –14, where P= price per unit.

a. Draw a supply-and-demand graph with these curves. What are the equilibrium price and the equilibrium quantity?

b. A per-unit excise tax is imposed on product X, and the market supply with the tax is now given by Qs = 2P – 19. Add this supply curve to your graph and identify the new equilibrium price and equilibrium quantity. What is the value of the per-unit tax? How much of this per-unit tax will be paid by consumers and how much will be paid by the producer?