1. Suppose the market for cameras has a supply curve of P = 30 + Q, and a demand curve of P = 240 2Q. Assume that the market is perfectly competitive.

a) What will the equilibrium price and quantity of cameras be? [4]

b) Calculate the producer and consumer surplus associated with the equilibrium found in part (a). [2]

c) Suppose the government levies a tax of taka 18 per camera sold. What is the new quantity of cameras sold? What price do consumers pay? What price do producers receive? [5]

d) Find the new producer and consumer surplus associated with your answer to part (c). How much is the dead weight loss?[5]

e) How much revenue does the government raise from the tax?[1]

f) Suppose now the government decides to give subsidy of taka 10 instead of taxing the producer, what will be the equilibrium price and quantity ?[3]