Question
1. 'Price controls, like indirect taxes and subsidies, are a form of government intervention in the market, yet they differ in that price controls give
1. 'Price controls, like indirect taxes and subsidies, are a form of government intervention in the market, yet they differ in that price controls give rise to disequilibrium market outcomes.' Explain.2. The government decides to impose an indirect tax on tomato of Rs15 per kg. (a) Using a diagram, analyse the effects on market outcomes. (b) Discuss the consequences of the tax for stakeholders.3. The government decides to grant a subsidy on milk of Rs15 per litre.(a) Using a diagram, analyse the effects on market outcomes.(b) Discuss the consequences of the tax for stakeholders.4. The market demand and supply functions of a commodity are given by: Qd=40-1/4P and Qs=10+1/2P.where Qd = quantity demanded, Qs = quantity supplied and P = priceCalculate the equilibrium price and quantity.Calculate the price elasticity of demand and supply at the equilibrium price.If the government imposes a tax of 5 per unit, what is the new equilibrium price and quantity?Who pays the tax?What is the price elasticity of supply at the new equilibrium price?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started